With the end of financial year fast approaching, taxpayers need to act now to make the most of initiatives to boost their retirement savings, the peak body for superannuation and retirement policy and research said today.
The Association of Superannuation Funds of Australia (ASFA) said there were a number of Government incentives Australians could take advantage of before June 30 to increase their superannuation savings, including the Government co-contribution.
“The Government co-contribution scheme is one of the simplest ways for low and middle-income earners to build their super savings to ensure they can afford the lifestyle they desire in retirement,” said ASFA chief executive Pauline Vamos.
“To get the co-contribution, most employed people will not have to do anything other than make a personal contribution to their superannuation account and lodge their tax return as they normally would.”
The initiative helps eligible taxpayers boost their retirement savings by the Government matching personal contributions up to $1,000.
Another retirement savings maximiser available to low-income earners is the Low Income Super Contribution (LISC); a super tax refund capped at $500 confirmed in the Federal Budget earlier this month.
“From 1 July 2012, if you earn less than $37,000 a year and your employer makes before-tax super contributions on your behalf, then you can expect a payment made directly to your superannuation account by the Federal Government,” said Ms Vamos.
Incentives are not only offered for those on lower incomes, there are a range of superannuation tax breaks and contribution arrangements to help all Australians save more for their retirement. See ASFA’s end of financial year super checklist for information on how people can get the most out of these 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.
For media inquiries, please contact:
Pauline Vamos, CEO, 0433 169 342
Rebecca Glenn, GM Marketing and Communications, 0416 170 439
Megan McDougall, Media and Communications Coordinator, (02) 8079 0849
About ASFA – the voice of super
The Association of Superannuation Funds of Australia is the peak industry body for superannuation and retirement policy and research. Its members represent over 90 per cent of the approximately 12 million Australians with superannuation. ASFA members manage or advise on the bulk of the $1.3 trillion in superannuation assets as at September 2011. ASFA is the only organisation that represents all types of superannuation funds (retail, industry, corporate and public sector) and associated service providers.