Superannuation is a highly effective way to provide a retirement income stream for retirement. However, with all of the options, conditions and choices available it can be very confusing.
At Grace Financial Services we are committed to looking after your best interests. That includes working out an appropriate strategy and platform for your superannuation investments.
How does a government get people to look after themselves during retirement, so that the government doesn't have to do it themselves? Superannuation!
Superannuation is simply a tax effective scheme to lock away money for retirement or an extreme personal crisis.
Because our superannuation is going to be locked away for a future time, government policy must make it attractive enough for us to use it.
Part of the matter is covered with the fact that superannuation is mandatory for employers. Currently they must pay 9.5% of our wages into a super fund for us. That is increasing as years go by.
The required contribution paid by the employer is not taxed in the hands of the employer, but instead the superannuation fund is concessionally taxed at 15% for most employees.
In general, the standard Superannuation Guarantee Contribution (SGC) that your employer is required to make isn't going to be enough to replace the equivalent of your working income through retirement. More is needed.
There are a variety of ways to get more into your super fund, but one of the most basic, and effective, is salary sacrifice to super.
Before tax is taken out, your employer takes some of the money that would have come directly to you minus the tax, and instead adds it to what they are paying into your superannuation fund. While the super fund is taxed on the money, that's still at 15% which generally is much less than what your employer is taking out.
That's a great way to grow your super and pay less tax.
It's also possible to pay funds into your superannuation that you have already paid tax on. Perhaps you receive an inheritance, or simply decide to move some of your wealth into superannuation. This might be to get it into a more tax effective structure or for other reasons. When those funds go into super, no tax is paid on the contribution.
Note that with both types of super contributions, there are limits on what you can put in each year.
If you are on a low income, a good strategy may be to make a personal, undeducted contribution of $1,000 to your superannuation fund each year. At the present time, the government generally will then add to that up to $500 in the following year, after your tax return has been submitted, the amount depending on your income.
If your spouse is on a very low income, you may be able to contribute up to $3,000 to his or her superannuation as an undeducted spouse contribution and receive a 18% tax offset for yourself. That's up to $540.
With governments continually trying to balance budgets, please voters and manage future liabilities, superannuation laws are constantly changing. Be very careful about where you get your information from, because it may be out of date shortly after it is published.
The best approach is to have a financial adviser looking after your interests. Your adviser needs to keep as up to date as possible on the relevant legislation so that you may be given appropriate advice.
Here at Grace Financial Services we can give you that advice whether you live near our offices or are across the country. Call us on 02 4905 0250 today!
• A financial adviser can help you see the full picture, including superannuation platforms and the investments they hold.
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