Boost Your Super

• Keep it together

  The biggest benefit of consolidating your super accounts in one place is that it saves money. Why pay multiple annual fees for multiple accounts if you only really need one fund?

  Consolidating super accounts leaves you with one account, one set of fees and one membership. It also reduces the amount of paper you receive in the mail. Having a single fund ensures your money is working hard for you. It maximises the investment earnings you receive on one large account balance, rather than on several small accounts at different funds.

  • Why does it matter?

    The biggest benefit of consolidating your super accounts in one place is that it saves money. Why pay multiple annual fees for multiple accounts if you only really need one fund?

    Consolidating super accounts leaves you with one account, one set of fees and one membership. It also reduces the amount of paper you receive in the mail. Having a single fund ensures your money is working hard for you. It maximises the investment earnings you receive on one large account balance, rather than on several small accounts at different funds.

  • How do I consolidate accounts?

    Bringing your accounts together is easy. The first step is to gather up all your old paperwork. This will tell you the names of the various funds and your membership details.

    If finding information about your old super funds is difficult, try contacting your previous employers. They should be able to direct you to the fund into which your superannuation contributions were paid.

    Once you have all the details, your current fund will be happy to help. Often this only requires filling in a single form and the fund will do the rest. Most funds have all the necessary forms on their website, or telephone their call centre and they will walk you through the process.

  • Look before you leap

    There are times when consolidating your super accounts isn't a good idea. Sometimes a fund will charge high exit fees if you leave, or it may offer special benefits (like high levels of insurance protection) that your current fund can't match.

    You need to check carefully before shifting your money, because once you leave the fund, it may not be possible to regain these benefits.

    So, look before you leap. Ask lots of questions and compare the benefits on offer. Your current fund may be able to help with this process, or contact a financial adviser such as Industry Fund Financial Planning (IFFP) for advice on your situation.

• Concessional and non-concessional contributions

  • Concessional contributions

    An employer, or in certain circumstances the contributor, can claim this type of contribution as a tax deduction. You pay a 15 per cent tax on these contributions.

    A cap of $25,000 a year generally applies to concessional contributions (i.e. employer and salary sacrifice contributions). The concessional contributions cap for the 2012/13 year (1 July 2012 to 30 June 2013) is $25,000 for all age groups.However, the Government has announced that from 1 July 2014 for person aged 50 or over with superannuation balances below $500,000 will be able to make up to $25,000 more in concessional contributions than allowed under the general concessional cap. A total of $50,000. 

    Contributions in excess of these amounts will be taxed at an additional 31.5 per cent.

    Employers are not required to make SG contributions for anyone aged over 74.

  • Non-concessional contributions

    This type of contribution comes from your after-tax pay. No tax deductions are claimed on these amounts and there is no 15 per cent tax payable on these contributions.

    A cap of $150,000 a year applies to non-concessional contributions.

    Up to and including the financial year that a person is age 64 on the 1st July, “averaging” provisions can be used, i.e. two years contributions can be brought forward to accommodate a larger one-off payment of up to $450,000 combined for a three-year period. CARE: A person born on 1st July cannot use the “averaging” provisions in the financial year they turn age 65. Also, if the contribution is to be made after attaining age 65, the work test must be met.

    If you are aged 65 to 74 a yearly contributions cap of $150,000 applies, provided you meet the work test.

    The work test requires that you work 40 consecutive hours in a continuous 30-day period during the financial year.

    Any contributions above these caps will be taxed at 46.5 per cent.

  For more information on concessional and non-concessional contributions please see our Glossary.

• Co-contribution

  Super co-contribution refers to the Federal Government topping up your own voluntary contributions to your super fund. The government pays it to your super account if you have made a voluntary contribution and your assessable income plus reportable fringe benefits plus salary sacrificed to superannuation (income) is less than $61,920 (2009/2010) a year.

  Under the co-contribution scheme, the government contributes $1 for each $1 you contribute to super from your after-tax pay to a maximum of $1,000 in a year.

  To get the full co-contribution amount you must contribute $1,000 of your money into the fund and your income is less than $31,920 a year. The co-contribution is payable at reduced rates if your income is between $31,920 and $61,920 in a year. It cuts out at $61,920. The government announced in the 2012/13 Federal Budget that the current freeze to the income thresholds would also apply for 2012-13 financial year.

  To be eligible you must be less than 71 years of age and working at least part time.

  Find out how much co-contribution you are entitled to at the Money Smart website 

  You do not need to apply for the super co-contribution. All you need to do is make a personal super contribution to your super fund and lodge a tax return.

  The ATO will use the information in your income tax return and contribution information to work out whether you are eligible. If you are, it will automatically calculate the co-contribution amount and deposit it in your super account.

  The co-contribution will be paid into the super fund in which you pay your contribution, providing that fund will accept the co-contribution. Most funds will.

• Salary sacrifice

  Super offers considerable tax advantages as a form of saving if your marginal tax rate is above the superannuation contributions tax rate of 15 per cent.

  The sacrificed amount is not considered a fringe benefit for tax purposes and your employer will not be liable to pay fringe benefits tax (FBT) on the super contributions or need to include the super contributions as a reportable fringe benefit amount on your payment summary.

  If you are under 75 years old, your employer can usually claim a tax deduction on the amount of salary sacrificed contributions they contribute to your super fund on your behalf.

  If you are earning more income than you need at present, or are in a high marginal tax bracket, you can obtain a tax advantage by sacrificing a portion of your salary into super. It means you forgo pay in your hand now for a higher retirement benefit later.

  So instead of paying your marginal tax rate, you can sacrifice pay now and pay tax at the rate of only 15 per cent on that sacrificed amount. Your employer pays the sacrificed portion of your pay into your chosen fund and your take-home pay drops accordingly.

  However, you should remember that super locks your money up until you are at least 55 years of age. Sacrificed pay is similarly locked up. You can only get access to your employer-funded super money before you reach preservation age in exceptional and very restricted circumstances.

  • How salary sacrifice works

    You can arrange for your employer to make additional pre-tax contributions for you. This is an effective means of increasing retirement savings for those people who earn more than $35,000 a year, because of the tax effectiveness of super:

    Example

    Bill earns $75,000 a year and has living expenses of $45,000 a year. How much can he save towards his retirement without a salary sacrifice arrangement?

    Salary	$75,000
    Less tax	$16,350
    Less Medicare levy	$1125
    Take-home pay	$57,525
    Less living expenses	$45,000
    Total towards retirement without salary sacrifice	$12,525

    Bill goes to his employer who agrees to make additional (salary sacrifice) contributions to Bill's super fund. Bill requests additional contributions of $18,721 are made. His salary drops to $56,279 and the effect on his take-home pay and savings is as follows:

    Salary	$56,279
    Less tax	$10,435
    Less Medicare levy	$844
    Take-home pay	$45,000
    Less living expenses	$45,000
    Plus super contribution	$18,721
    Less tax on super	$2,808
    Total towards retirement with salary sacrifice	$15,913

    By entering into the salary sacrifice arrangement Bill can save an additional $3,388 a year towards his retirement.

    Note: The above calculations are based on 2009/2010 tax rates.

    Warning

    Your employer may drop its SG contributions to your super fund based on the new lower salary. Therefore, you should enter into a written agreement with your employer specifying your ordinary salary before proceeding Should you have doubts, seek specific advice

• Transition to retirement

  You may be able to access your superannuation under the Government's Transition to Retirement (TTR) provisions. These measures encourage middle-aged and older workers to remain in the workforce, even if on a reduced working hours basis, and recognise that they may want to top up their reduced pay from their shorter working hours with money from their accumulated super. However, there is no requirement to reduce working hours to access TTR.

  Under TTR, you are able to draw down an income stream from your super (but not a lump sum) and at the same time continue to contribute to super from your wage or salary, via salary sacrifice, to build up wealth for retirement or to scale down your working hours without reducing your living standards.

  There may be tax advantages to you in opting to salary sacrifice.

  How TTR works is that if you are eligible, i.e. reaching preservation age, you will be able to roll over (transfer) your superannuation savings into what is called a “Super Income Stream” while salary sacrificing your income into super. However, as you are still working, the Super Income Stream will be non-commutable, i.e. you can't make lump sum withdrawal.

  The amount of drawdown each year is restricted, but is also variable and depends on your age. Your fund may be able to advise you on how much you can withdraw if you are 55 compared to when you are, say, 60.

  Access to lump sums from your super remains conditional on you retiring from the workforce other than for any unrestricted non-preserved benefits in your super account. You may however be subject to tax and there may be an adverse impact on certain tax offsets and governments benefits (e.g. Family Tax Benefits and Government co-contribution) if under age 60.

Technical advice provided by Industry Fund Financial Planning.