Lower your tax and boost your super

Use these tax-effective tips to make your super work harder for you.

The key to a comfortable retirement is a strong superannuation balance. Here are five tax-effective strategies that could help you give your super a boost.

Sacrifice your salary

If you earn more than $37,000 per year, giving up a portion of your pre-tax salary can be a great way of increasing your super and reducing your tax bill at the same time.

Ask your employer to take out some of your pay and redirect it to your super. The money taken out will attract a special tax rate of 15 per cent.

Lower your tax and boost your super

But don’t forget there are limits on the amount of pre-tax contributions you can put into your super. It’s $25,000 for all individuals aged under 75.

Non-concessional contributions

If you can spare the money, after-tax contributions (also known as ‘non-concessional contributions’), are a simple way to boost your super. You don’t pay any tax on these contributions once they’re in your super fund because you have already paid tax on the income as you’ve earned it. The limit for how much you can contribute to your super before you have to pay tax is currently $100,000.

If you are under 65 years old, you can boost your super even further through after-tax contributions by using the bring forward provision. This allows you to go over the non-concessional contributions cap by up to two years’ worth of contributions without being penalised, depending on your total superannuation balance on 30 June of the previous Financial Year. This means that the contributions cap that applies could be three times the standard cap for the financial year in which you make the contribution to your super fund. This means those eligible can contribute up to $300,000 into their fund using the bring forward provision.

Receive a government co-contribution

If you have a total superannuation balance less than the transfer balance cap on 30 June of the year before the relevant financial year and make after-tax contributions to your super, the government may match some or all of what you put in. How much the government will give you is dependent on how much you earn.

If you earn between $36,813 and $51,813 per year (before tax), the government’s co-contribution will reduce progressively as your income approaches $51,813. You will not receive any co-contribution if your income is equal to or above this threshold.

If you are eligible and earn $36,813 or less per year, the Government will pay $0.50 for every dollar you personally contribute to your SMSF up to $500.

Start a pension

There are two types of pensions that you can commence in your retirement and both have significant tax advantages: a transition to retirement pension and a simple account-based pension. With these pensions, you can receive either a lump sum, regular income stream or both, paid into your personal bank account.

You can commence a transition to retirement pension if you are between 55–64 and still working, which means that you can transfer the sum of your super to a super pension and withdraw between 4 per cent and 10 per cent of your pension account balance each financial year. A transition to retirement strategy can make the journey from working to not working more manageable and help you save on tax. You can increase your salary sacrifice contributions and then supplement your income with pension payments from your super.

You can start an account-based pension if you’re over 65 or between 55-64 and ’retired’, which provides you with a regular income stream. With an account-based pension, you also don't need to pay tax on any investment earnings. If you’re over 60 years old, you don't pay tax on pension payments. If you’re 55-59 years, the taxable portion of your account-based pension payments are taxed at your personal tax rate, minus a 15% tax offset.

Give your spouse a hand

The government’s spouse super contribution tax offset allows you to pay up to $3000 into your spouse’s superannuation fund and claim a tax offset of up to $540.

To be eligible your partner cannot have earned more than $13,800 in the financial year.

Considering tax-effective strategies and seeing which ones suit you could be a great way of topping up your super and have you looking at a brighter retirement.

If you want to learn more about SMSFs, download an information pack. If you’re ready to establish an SMSF, you can apply now with ESUPERFUND.

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