Australian Superannuation or Super as it is more commonly known is the term referred to by the Australians for their pension, it is a way of saving for retirement.
Contributions will be made into your Super Fund, which, over time builds into a larger sum earning investment income growing for your retirement.
When you retire, Australian superannuation is paid to you either as a lump sum or regular pension payments.
WHO PAYS INTO MY SUPER FUND?
Your employer does and you can too.
In Australia it is a requirement by law that employees contribute (currently a minimum of 9%) into your Super fund on your behalf. Some employers will contribute more than 9% often matching the contribution you make by the same amount up to a specified limit.
NOTE When applying for jobs be sure they tell you the salary less the Super, Super is a legal requirement it is not an additional benefit.
This means the chances are you will join a Super Fund just as soon as you’re employed (even contractors engaged under a contract for labour). Of course as with any regulation there are a few exceptions and in the case of Super contributions the main groups are:-
- If you are earning less than $450 per calendar month
- If you are aged 70 years or over
- If you are aged 18 years or under and work less than 31 hours a week
- If you are employed for domestic or private work for work for less than 31 hours a week
- covered by a bilateral super agreement. (for people working temporarily in some other countries).
WHAT IF I AM SELF-EMPLOYED OR UNEMPLOYED?
If you are self-employed, then the choice is yours is you want to contribute into a Super Fund. Likewise if you are not currently employed, you can still join and contribute to a fund.
WHAT ABOUT PEOPLE ON A LOW INCOME?
If you are earning less than $58,000 a year then Super Co-contribution is something you need to be aware of.
The Government will make personal superannuation contributions, to those who are eligible
The Government will contribute up to a $1,000 into your Aussie Super Fund. If:-
your annual earnings are less than $28,000 and you make a contribution into your super fund the Government will put $1.50 in for every $1 you put into your Superannuation Fund.
The Superannuation Co-contribution is on a sliding scale but if you earn less than $58,000 you will be entitled to something.
It’s worth making the effort, just think if you are on a low income how $1,000 extra in your Super Fund each year will add up.
Lets assume an average working life is 40 years.
If you are earning less than $28,000 (not difficult if you are working part time) thats an additional $60,000 into your Super Fund paid by the Government.
Now think how much that $60,000 will be worth following the investment term until you retire.
$1,500.00 a year invested over 40 years will give you a return of $200,819 (compound interest at 5%).
Now include the $1,000 a year ($20 a week) contribution you would need to make to recieve the Government $1,500. That means you would be receive $334,699 into your Super Fund.
Of course these figures are only an indication of what you could get.
For more information on your Super Co-contribution see www.ato.gov.au . They even provide a calculator to help you work out how much Australian Superannuation Co-contribution you are entitled to each year.
CAN I CHOOSE MY OWN AUSTRALIAN SUPERANNUATION FUND?
1 July 2005 saw the introduction by the Choice of Superannuation Fund legislation of a choice of legislation fund for most employees. Employers will have to give us the freedom to choose our Super Fund.
The choice of Superannuation is expected to affect over 4.5 million employees in the Austraians workforce. There are a few exceptions which include:-
- Some public sector employees.
- Some employees under Australian Workplace agreements.
- Employees who have all or part of their contributions made under, or in accordance with a State industrial award.
- Some employees recieving defined Benefits Contributions.
- Employees whose contributions are made under a low of the comonwealth, a State or Territory.
If the Choice of Superannuation Fund applies to you then there are key opportunities and and considerations for you to think about.
- The CHOICE of Super Fund provides you with the flexibility to request your employer to pay your superannuation into a fund nominated by you. This will enable you to consolidate your superannuation and have one fund. If you are moving funds from overseas this could make your SUper Fund easier an more effective to manage and operate.
- If you elect to CHOOSE a superannuation fund for your future employer contributions after 1 July 2005, you are required to notify your employer in writing of your fund choice.
- Of course you can elect to do nothing, in which case, your superannuation will continue to be paid on your behalf, into you employer’s eligible default fund. It may be the case that you already have sufficient investment choice and flexiblity in your existing superannuation fund.
Take the OPPORTUNITY to review your options and find out what is the best for you. If you would like to learn more about Australian superannuation then you can visit the ATO website
HOW CAN I REDUCE MY INCOME AND REDUCE MY TAX BILL?
An excellent tax return question to be asking and one to think about early on in the tax year.
OK, OK I can hear you saying
“its easy to reduce my income, I could just stop working”.
That is not what I meant………….. the smart thing to do is reduce your income without reducing your lifestyle. If you can build up your financial position at the same time then that’s even better.
To achieve this you need to look at strategies and alternatives which will assist your next wealth position. A financial planner would be a good person to direct your tax return questions. Ask a financial planner your tax return questions now and put some strategies in place for thenew tax year
If you want to reduce your income in this financial year then you will need to implement your strategies before 30 June.
There are several alternatives that you may consider:
Superannuation – Salary Sacrifice:
You can sacrifice some of your salary into superannuation before 30 June for the current tay year.
Superannuation – Self Employed:
Self employed people (earning more than 10% of their income from their own business) are able to contribute to superannuation for themselves and clam tax deduction. There are limits on the amounts, so, please take financial advise and obtain further information.
Advance Payment for Services
if you were to pre-pay the interest on the mortgage of an investment property then you can claim a tax deduction for that cost. However there is a time limit, you can usually only pre-pay expenditure for up to 12 months. so please check and take financial advise before you make the payment (there are some rules which only apply to small business and small tax payers so talk to your accountant for a full explanation on how this works)
USEFUL AUSTRALIAN SUPERANNUATION LINKS?
Australian Taxation Office – Super
Australian Taxation Office