Time to take advantage of super incentives

EOFY super checklist – how to get the most out of Government incentives:

• On less than $61,920 a year?

If you’re a low-income earner, contribute some of your after-tax dollars to your superannuation account to receive a payment from the Government under the co-contribution scheme. For the 2011-12 financial year, after-tax super contributions will be matched at $1 for every $1 contributed up to a maximum co-contribution of $1,000 for those on incomes up to $31,920. The $1,000 limit is reduced by 3.3 cents for each dollar of income over $31,920. The maximum co-contribution phases out at an upper threshold of $61,920.

• Does your spouse earn less than $13,800 a year?

It might be worth considering making an after-tax super contribution up to $3,000 on their behalf so you can receive a tax offset of up to $540 and increase your spouse’s retirement savings. This tax offset does not appear to be as well used as it should be, with only around 16,000 people making a claim in 2009-10.

You can find out more about the superannuation spouse contribution tax offset on the Australian Taxation Office (ATO) website.

• Have you been making salary sacrifice contributions?

It’s important to remember that salary sacrificed contributions to your super fund form part of your concessional contributions. Concessional contributions are included in the assessable income of your fund and are taxed at 15 per cent. However, there is a cap on the amount of concessional contributions a person can make each income year. If you have contributions to more than one super fund, all contributions will be added together.

Keep in mind that apart from any salary sacrificed contributions, concessional contributions also include:

• your employer’s contributions under the Super Guarantee; and
• any additional contributions your employer makes on your behalf.

If your concessional contributions exceed $25,000 (and you’re aged under 50) you will be subject to additional tax on your contributions. Over 50s also need to be cautious. For the 2011-12 financial year over 50s had a concessional contributions cap of $50,000. However the Federal Budget (8 May) has reduced this in the 2012-13 financial year to $25,000.

It is important that you have a clear idea just how much contributions have been made on your behalf if you are getting close to exceeding your contribution cap. It is also a good idea to make your salary sacrifice contributions and any other contributions at least several weeks before the end of the financial year. Superannuation funds often get a rush of contributions at the last minute and at least some of these may end up being credited to your account in the next financial year.

The ATO website has more information on the contribution caps.

• Likely to receive a bonus from your employer?

You may want to consider salary sacrificing the amount into super rather than receiving it as cash. You can potentially reduce tax on your bonus by up to 31.5 per cent and/or make a larger after-tax investment. If you’d like to take this option, you should speak to your employer and enter into an agreement before the amount becomes payable to ensure you comply with the taxation requirements.

• Have you lost contact with one or more of your super accounts?

There were 2.3 million accounts in unclaimed super held by the ATO in 2010-11, with a closing value of $730 million. If you think one of those accounts might be yours, contact the ATO by calling 132865 (you will need to have your tax file number handy) or use its online search function, SuperSeeker, for any of your accounts that might be listed as lost or unclaimed by the ATO.