Contributing to your Retail Superannuation Fund
As you progress through your working life, saving for retirement takes an increasing priority if you are seeking to continue a comfortable life when you retire from work.
Aside from the Age Pension provided by the government, Australian Superannuation provides a solid platform for you to bolster your retirement savings. There are two ways in which you can grow your Superannuation fund and these are through investment growth and also the amount you contribute/save to it.
In this article, we will cover the main things you need to know when contributing to your Superannuation Fund.
Types of Super Contributions’
- Concessional Contributions – These are classed as ‘Deductible Contributions’ because tax is deducted from the fund, before the contribution is applied to your Super Fund. The Superannuation provider will deduct tax at the ‘concessional’ rate of 15% and pay the Australian Tax Office (ATO) on your behalf. If you earn over $250,000 then you may be required to pay an additional 15% tax under the ‘Division 293’ tax rule. The maximum ‘concessional’ contribution you can make, each financial year, is $25,000. However, from July 2018, a new rule was introduced that allows individuals who have a super balance of less than $500,000, to carry forward any unused allowance for up to 5 years.
- Non-Concessional Contributions – These are contributions where a tax deduction is not claimed. Examples of these can be transfers from an overseas pension scheme, spouse contributions, government co-contributions and some personal contributions where a tax deduction has not been claimed. A maximum non-concessional contribution of $100,000 per financial year is permitted without penalty. It is also possible to ‘bring forward’ a further two years of the allowance, providing you with a total of $300,000. Any excess contributions above the limit will be taxed at 45%.
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Under Australian law, it is a requirement for employers to contribute to your Superannuation fund if, you are over the age of 18 and earn a minimum of $450 per month. This is known as the Superannuation Guarantee (SG). If you are under the age of 18, then you must work for a minimum of 30 hours per week to be eligible for Superannuation Guarantee contributions. The rate of the Superannuation Guarantee currently stands at 9.5% of your salary, which will increase to 10% by July 2021. For more information on the Superannuation Guarantee (SG), check out our article here.
Another important factor to consider is that if you are between the age of 67 and 74, then you must meet the requirements of the ‘work test’, in order to be eligible to contribute to your superannuation fund. In summary, you must have been employed for at least 40 hours in a period of not more than 30 consecutive days during the financial year to pass this test
If you would like to find out more about contributing to a Retail Superannuation Fund, contact us today and a member of our team would be happy to answer any questions you may have.
This article does not contain personal or financial advice. It is provided for general information only and does not take into account your personal objectives, financial situation or needs. IVCM is not authorized to provide you with any personal or financial advice.
If you require financial any advice then you must make sure that you obtain advice from a suitably qualified financial adviser.