Growing Your Super
If you’re nearing retirement or just want to put a little extra away for the future, contributing to superannuation might be your best bet. There are two main ways to increase your super balance, salary sacrificing super and personal super contributions.
Put simply, salary sacrifice is an arrangement where you forego part of your salary in return for your employer providing the amount sacrificed into super. You should be aware that your salary sacrificed contributions are considered to be contributions from your employer. Therefore, before you commence any salary sacrifice arrangement, it is advisable that you and your employer clearly state and agree on all the terms of the agreement. This may involve an explicit agreement between you and your employer that specify that they continue to pay the minimum super guarantee amount ignoring any salary sacrifice contributions you may make. Salary sacrifice is a tax-effective way to boost your super, as the sacrificed component is not counted as your assessable income for tax purposes (provided the salary sacrifice arrangement itself is “effective”) and hence is not subject to PAYG withholding tax. Although there are no limits per se to salary sacrificing superannuation, any sacrificed amounts are counted towards your annual concessional contributions cap. Therefore, tax-effective salary sacrificing arrangements are effectively limited to the concessional contributions cap.
Personal super contributions are the amounts you contribute to your super fund from your after-tax income (ie take home pay). These contributions are in addition to the compulsory super contributions your employer makes and does not include any contributions made through salary sacrifice arrangements. Prior to 1 July 2017, only self-employed people could claim a deduction for personal super contributions, but from 1 July 2017, most people (regardless of their employment arrangement) are able to claim a full deduction for personal super contributions they make to their super until they turn 75. However, if you’re between the age of 65 and 75, you will need to meet the “work test” to be eligible to claim the deduction. If you have made a personal super contribution and want to claim a tax deduction, you will need to complete and lodge the form “Notice of intent to claim or vary a deduction for person super contributions” with your super fund and have this notice acknowledged in writing by your fund. You will need to do this before you lodge your tax return for the income year in which you are claiming a deduction for. If you want to make the most of your super, we can help you avoid all the pitfalls and get it right. Contact us if you would like to know more.