You’ve no doubt come across a range of super strategies – from salary sacrificing to spouse contributions – but how do you know if they’ll suit your situation?
You’ve no doubt come across a range of super strategies – from salary sacrificing to spouse contributions – but how do you know if they’ll suit your situation?
And articles such as this one can be handy, too. While you’re pondering which expert to consult, here are a few common super strategies to get your head around.
Salary sacrifice
Salary sacrificing involves asking your employer to make extra contributions into your super from your pre-tax pay. These are known as concessional contributions, and are taxed at 15 per cent, which is likely to be lower than your marginal tax rate, and can therefore reduce the amount of tax you pay.
“An employee on 37 per cent marginal rate will save 22 per cent tax on every dollar that is salary sacrificed into super,” Chapman says.
Generally, extra concessional contributions are tax effective if you earn more than $45,000 a year, according to MoneySmart.
Spouse contributions
If your spouse earns less than $40,000, you can claim a tax offset (or rebate) when you make contributions into their super fund. This can be an effective way to boost your partner’s super if they’re on a low wage, don’t work or are taking a career break.
“If your spouse’s income is $37,000 or less, a tax offset of 18 per cent can be claimed on any spouse contributions made, up to $3000,” Cross says.
If your spouse earns between $37,000 and $40,000, the offset gradually reduces.
Downsizer contributions
If you’re over 55 and sell your family home, you can make downsizer super contributions. As long as it was your main residence and you owned it for at least 10 years, you can put up to $300,000 ($600,000 for a couple) of the proceeds from the sale of your home into super – in addition to the normal caps.
This can be a great way to shift a lump sum into the tax-advantaged world of super, but Chapman warns that it may affect your ability to access the age pension.
“A person’s principal home is exempt from the Centrelink asset and income tests,” he says.
“Individuals who sell their home and use some or all of the proceeds to make a super contribution may see a reduction in their social security benefits.”
Transition to retirement
A transition to retirement (TTR) strategy allows you to access some of your super while you keep working.
If you’ve reached your preservation age – between 55 and 60, depending on when you were born – you can use TTR to boost your income if you go part-time, or to boost your super (and save on tax) while you keep working full-time.
The strategy involves transferring some of your money into an account-based pension to receive as income, but keeping some money in your super account so you can still make contributions.
“It enables you to continue to receive super contributions, helping to replace the money you take out, and it enables you to pay less tax: if you are 60 or older, your TTR pension payments are tax-free,” Chapman says.
Cross recommends reaching out to your super fund to guide you through this.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.