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Superannuation

7 super strategies for end of financial year

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The end of the financial year is a good time to think about how you could grow your super and start saving for retirement.  Here are some options you could consider to help your super work harder for you.

1 – Tax-deductible super contributions

You may be eligible to claim a tax deduction for your personal super contributions.  By doing this, you may be able to pay less tax while saving more for your future.  Your eligibility can be affected by your age, sources of income and the level of salary sacrifice and certain other employer contributions made for you. To claim a deduction, you must give a notice to the Trustee of your super fund and have it acknowledged.

Keep in mind that personal deductible contributions count towards your annual before-tax contributions cap.  The current before-tax contributions cap is $25,000 per financial year.  Any contributions made above these limits will attract additional tax.

2 – Salary sacrifice to top up your super

Salary sacrifice is an arrangement where part of your before-tax wage or salary is paid into your super account instead of being received as take-home pay.  It could be an effective way to boost your super and help you with saving for retirement.  There may be tax advantages for you, depending on how much you earn.

To get started, do a budget to work out how much you can afford to contribute to your super from each pay packet.  You may also consider talking to your employer to find out if they can set up salary sacrifice arrangements for you.

Keep in mind that salary sacrifice contributions count towards your annual before-tax contributions cap of $25,000 per financial year.  Personal deductible contributions and contributions made by your employer also count towards your annual before-tax contributions cap.

3 – Consider a one-off contribution

After-tax super contributions are made from money you have already paid income tax on and won’t be claiming a tax deduction on.  For example if you work for an employer, making a contribution to super directly from your bank account is considered an after-tax contribution.

Investment earnings within your super accumulation account are taxed at up to 15%, compared to your marginal tax rate which applies to investments you may hold outside of super.  Please note that depending on your income level, your marginal tax rate may be less than 15%.

The annual limit for after-tax contributions is currently $100,000 if your total superannuation balance is below $1.6 million at the start of the financial year.  In certain circumstances, you may be able to bring forward three years of after-tax contributions into one year, contributing up to $300,000, if you haven’t triggered the rule in the previous two years and your total superannuation balance is below $1.4 million at the start of the financial year.  You may still be able to contribute part of the bring-forward if your total superannuation balance is between $1.4 million and $1.5 million at the start of the financial year.

4 – Government co-contribution

In the 2018/19 financial year, if you are a middle to low income earner, adding to your super from after-tax money could see you entitled to a government co-contribution worth up to $500.

To be eligible, you need to earn less than $52,697 in the 2018/19 financial year and be aged below 71 at 30 June 2019.  You must also have a total superannuation balance of less than $1.6 million at the start of the financial year to be eligible.

The maximum co-contribution of $500 is available if you earn less than $37,697 in the 2018/19 financial year and if you have made a contribution yourself of at least $1,000.  The co-contribution steadily reduces as your income rises and until it reaches zero at an annual income of $52,697.

5 – Spouse super contribution tax offset

If your spouse or partner’s assessable income is less than $40,000 in a financial year, and you decide to make super contributions on behalf of your spouse, you may be able to claim a tax offset for yourself.

The maximum tax offset available is $540 if your spouse receives $37,000 or less in assessable income in the 2018/19 financial year.  The tax offset is progressively reduced until it reaches zero for spouses who earn $40,000 or more in assessable income in a year.

6 – First home buyers

You may be able to make voluntary superannuation contributions to use towards a deposit for your first home under the First Home Super Saver Scheme (FHSSS) starting from 1 July 2017. Voluntary contributions you make, plus associated earnings, can be accessed from 1 July 2018 subject to meeting eligibility criteria.  Whether using concessional or non-concessional contributions, the total amount of contributions you can withdraw is capped at $15,000 a year (or a maximum of $30,000 in total).  Superannuation Guarantee contributions, as well as contributions that don’t count towards or are in excess of the contribution caps, cannot be accessed under the FHSSS as part of your deposit.

7 – Downsizer contributions

From 1 July 2018, if you are planning on downsizing your family home of ten years or more and are aged 65 or over, you may be able to contribute up to $300,000 from the sale proceeds to superannuation as a downsizer contribution.  If you have a spouse, they could also contribute up to $300,000 to their superannuation from these proceeds.  Downsizer contributions do not count towards your before or after-tax contribution caps or caps on contributions for total superannuation balance.

Be aware of annual limits

As annual limits apply to the amount you can add to your super each year, it is important to consider how much you have already added to your account (or accounts) during the financial year to know which strategies can work for you.

Source: BT

It’s time to close the gender superannuation gap

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In an ideal world, we’d retire from work when we felt like it, free to travel the world, take up a new interest or just relax.  But, many women don’t have that luxury.  They are living longer than men but retire with 37% less superannuation.  And for vast numbers that could mean restricted choices about how they live their retirement.  40% of single women live in poverty and among married women, 44% rely on their partner’s income.

This gender super gap is caused by a number of reasons.

  • Women working full-time earn 18% less than men.
  • Women are more likely to work part-time and they generally take time out of the workforce to raise a family or look after elderly parents.
  • They’re not planning ahead with super contributions if they want to start a business, travel, study or take a gap year.

In 2018, women in full-time work took home an average $25,717 a year less than men.  While raising their children, women often return back to part-time work: 45% of women work part-time compared with 19% of men.

HOW TO ACHIEVE #BALANCEFORBETTER?

Short of major changes in the world of work and superannuation policy, the way to achieve a better super balance comes down to you.  Rest assured, there’s a number of ways to do it.  First of all, “get educated”, says Nikki Brown, Vice Chair of Women in Super.

It’s advice that applies to any age.  If your knowledge about financial matters is limited to checking your superannuation statement or balance on your app, learning how to drive your super more effectively doesn’t have to be a stretch.  Your superannuation fund’s website will provide lots of information.  You can also visit an independent site such as the Australian Securities and Investment Commission’s MoneySmart for easy-to-understand information about how super works and the options available to you.

If that’s not your thing, the next step may be to talk to a financial adviser who can assess your financial position, discuss your plans for the future and lay out some possibilities that might suit your situation.

For young women just starting out in their careers, retirement is hardly a pressing concern, but making your money stretch further can be.  This is a great opportunity to make one of the biggest changes to your financial fortune later in life.

START THINKING ABOUT THE FUTURE NOW

The best thing you can do is to start early in building your retirement income.  A little bit extra towards your super now could grow to a bigger amount later on.

Don’t think that it’s too late once you hit your 40s to make a difference to your super balance.  Sure, you may have stopped work for a period to have a family and you may now be working part-time.  Or you may be divorced and struggling to make the rent or mortgage payments, let alone super contributions.

But, at this age, and later in your 50s and 60s, the friends of your future financial stability are continued employment (while you’re working, you can contribute to super); having a budget (live within your means); getting good financial advice (understand it yourself or talk to an expert).

If you want to know how you can better manage your super and build it as an income stream for your retirement, you can talk to your super fund or seek advice from a financial adviser.

Source: Colonial First State

Super contributions guide

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As well as super guarantee payments from your employer, there are all sorts of ways to save more into super and boost retirement savings.  Find out more in our comprehensive super contributions guide.

Super Guarantee contributions

If you work for an income, your employer is required by law to pay your superannuation guarantee (SG) contributions at least once a quarter.  Whether you’re full or part-time, salaried or casual, if you receive more than $450 per month in wages or salary, you’re legally entitled to these SG payments.

Concessional contributions

Super guarantee contributions are treated as concessional contributions, which means they’re pre-tax contributions.  When you choose to make extra voluntary contributions into super from your pre-tax salary, these are also treated as concessional contributions.  This can be done through a salary sacrifice arrangement with your employer and you may benefit from tax concessions on these extra super payments, depending on your marginal tax rate.

There is a maximum amount of concessional contributions you can pay into super in each financial year.  This is called the concessional contributions cap and the total amount at the time of writing is $25,000, this includes both SG contributions from your employer and voluntary before-tax contributions.

You can check the ATO website (www.ato.gov.au) for the latest information about the concessional contributions cap for super.

From July 2018, if you don’t contribute up to the maximum concessional contributions cap, you can carry forward unused amounts to the next financial year, for up to five years.  This only applies if your total superannuation balance is less than $500,000.

The ATO website provides more information on this new ‘carry-forward’ arrangement.

Non-concessional contributions

$25,000 may be the annual limit on concessional contributions, but that doesn’t mean you can’t contribute more into super as an after-tax payment.  If you’re approaching retirement, it may be in your interests to make super contributions from your net income, so you can maximise retirement savings before you stop work.  A financial adviser can help you review your goals and finances for retirement and help you decide whether to top-up your super.

These payments from your after-tax income are called non-concessional contributions.  If your super balance is less than $1.6 million, you can pay up to $100,000 into your super as non-concessional contributions in the current financial year.

Government contributions for low-income earners

If you’re on a low income, the government offers two ways to boost your super savings if you’ve made contributions, either as SG or voluntary payments into super.

By making non-concessional contributions, you could be entitled to an annual government co-contribution of up to $500 directly into your super fund.  Eligibility for this payment depends on your taxable income and the amount you contribute into super as an after-tax payment.

Visit the ATO website to find out more about the government co-contribution scheme for low-income earners and determine whether you’re eligible.

Tax offset for low-income earners

If you’re on a low income and make concessional contributions into super – and this includes payments made by your employer under the SG – you could be entitled to a tax offset at the end of the financial year.  This is called the Low Income Superannuation Tax Offset (LISTO).  Eligibility for this tax offset depends on your taxable income and the amount you or your employer contribute into super as a before-tax payment.  If you are entitled to the LISTO, the amount will be paid into your super fund after you lodge your tax return.

Visit the ATO website to find out more about LISTO and determine whether you’re eligible. 

Spouse contributions and tax offsets

Many super funds allow you to split your contributions – including compulsory payments from your employer under the SG – with your spouse (married or de facto).  It’s important to be aware that these contributions will still count towards your concessional and non-concessional contributions caps.

If your spouse isn’t working or is earning a low income, you may also be entitled to a tax offset for these contributions into their eligible super fund.

Visit the ATO website to find out more about the tax offset for contributions made to super on behalf of your spouse and determine whether you’re eligible.

Source: Money & Life

4 tips for women to take control of their super

By | Financial advice, Superannuation, Wealth Creation and Accumulation | No Comments

Faced with average lower earnings, possible time out from the workforce to raise children, and longer life expectancy, it can be a struggle for women to save enough money in their super. According to the 2017 HILDA survey, Australian women are retiring with an average superannuation balance of $230,907 while men are retiring with about twice this amount.

But if you’re a woman earning an income, it’s never too late to play catch up.  Looking at your super and taking action now could make a difference over time to how much savings you have in super for retirement.

1 – Get to know your super better – it’s your money

Superannuation, or ‘super’, is money set aside while you are working so that when you stop working it will provide you with an income in retirement.  If you are an employee, your employer should be making super contributions to a superannuation fund on your behalf. These payments, known as super guarantee contributions or concessional (before-tax) contributions, will be equivalent to 9.5 per cent of your salary or wages.

If you are self-employed, you will need to pay yourself super to provide for your retirement.  You can make regular contributions or make lump sums less frequently, to suit your cash flow.  To get to know your super better, start by checking your balance regularly, along with the insurance and investment options you have to make sure they are the best fit for your circumstances.

The Australian Taxation Office (ATO) recommends that you check your employer is paying the correct amount of super on your behalf.  If you are unsure how much your employer should be paying you can use the ATO’s Estimate my super tool.  If your employer is not paying the correct amount you can report this to the ATO online.

Many super funds arrange life and disability cover for their members, for a fee.  Having insurance can provide a good sense of security for you and your family.  It’s important that you know what cover you have as you might have similar cover under another type of policy.  This might mean you are paying for the same cover twice, however you will not be able to claim twice.

2 – Consolidate your super and save on fees

It’s a good idea to make sure all your super is in the same place.  If you’ve changed jobs, different employers might have made your super guarantee payments to different funds over the years.  This means you could have ‘lost super’ in accounts you’ve forgotten about.  If your super is in multiple funds, you also have to pay separate administration fees to each fund, which eats into your retirement savings.

3 – Contribute more and watch your super savings grow

Want to see your super grow faster?  You can make payments into your super fund account in addition to the Super Guarantee 9.5 per cent that your employer pays on your behalf.  This could really boost your super over time, and can help you make up for periods when you are not working.  Even small amounts could make a difference.

The different types of additional contributions that can be made to your super fund are:

  • Concessional (before-tax) super contributions – these are super contributions you make before you pay tax on them;
  • Non-concessional (after-tax) super contributions – these are super contributions you make from sources that have already been taxed.

Be aware that the Federal Government applies monetary caps to these contributions to limit the tax concessions associated with making super contributions.  Some types of contributions if made in excess of these caps are subject to tax rates of up to 49 per cent.

4 – Don’t forget your TFN, otherwise you may pay more tax

To confirm if your super fund has your tax file number (TFN), take a look at your super statement.  If your TFN is not listed, contact your fund and give it to them.

The benefits of providing your fund with your TFN are:

  • Your fund will pay less tax on employer contributions (and pass the savings on to you);
  • Concessional contributions are generally only taxed at 15 per cent, which means you could lower your taxable income;
  • You are less likely to lose track of a super account;
  • You will not miss out on government super payments – for example, the government co-contribution if applicable;
  • You will be able to make personal (after-tax) contributions to the fund.

 Source: Colonial First State

Superannuation – know your rights

By | Financial advice, Superannuation | No Comments

There’s a staggering amount of superannuation that may never find its way to the people who should be spending it in their retirement years.  According to ATO figures, there’s approximately $12 billion in unclaimed super in their coffers.  That’s a lot of money just waiting to be transferred to Aussies who have lost track of account balances after changing their job, name or address.  Getting this super back is pretty straightforward and either the ATO, your myGov account, or your current super fund(s) can help you bring all your super together.

Sadly, the amount of super that never gets paid at all is even more alarming.  Back in 2016, Industry Super published a report claiming that around 2.4 million employees are being short-changed in mandatory super payments to the tune of $3.6 billion per year.  At the time, the report estimated the total figure for unpaid super could reach $66 billion by 2024.  That’s a huge potential problem with what’s known as super non-compliance – employers deliberately failing to pay money their workers are legally entitled to under the super guarantee (SG).

Who should receive super from their employer?

Most employees, whether full or part-time, salaried or casual, must be paid super contributions by their employer under the SG.  When you receive more than $450 per month in wages or salary, then you’re entitled to the SG.  If you’re under 18 or working as a private/domestic employee – such as a nanny – you’ll need to be working for more than 30 hours per week to qualify.

How much super should you be getting and when?

Under current legislation, SG payments should be made at the rate of 9.5% of your salary, or ordinary time earnings (OTE) if you’re a casual worker.  Your employer is required to make these payments to your nominated super fund(s) every three months at least.  When an employer pays your super later than they should, there are still consequences for your retirement savings.  The bigger your super balance the more money you can earn from investing it.  So for each and every day that a dollar is in your super account, it can be helping you grow your retirement nest egg.

Missing out on these payments is going to have an even greater impact on your super balance in the next few years.  Legislation has been passed to increase the SG rate from 1 July 2021 and the rate will increase by 0.5% each year from this date, reaching 12% by 1 July 2025.

Are you missing out?

According to the Industry Super report, it’s small and medium sized businesses that are most likely to come up short with SG payments.  An ABC news story from May 2018 highlights how much of a problem unpaid super can be in the hospitality industry.  Workers report having seen super payments on their pay advice, not realising the money wasn’t being paid to their super provider.

Take some time to check your latest super statement to see when SG payments have been made and how much is being paid.  Many funds will also offer you a login so you can check in now, and in the future, to make sure contributions from your employer are up to date.

Super shortfall – what you can do

If you find your super balance isn’t all it should be due to super non-compliance, the ATO and Fair Work Ombudsman should be your first port of call for more information, or to report the problem.  With the ATO having announced a 12-month amnesty for unpaid super starting from 24 May 2018, employers could be expected to be more co-operative in settling an unpaid super claim without the usual stiff penalties that would usually apply.

The amnesty is part of a raft of proposed legislative changes designed to crack-down on super non-compliance.  It includes harsher penalties for directors of businesses who fail to pay super and requirements for immediate reporting of employer SG contributions to the ATO by super funds.  This will act as an ‘early warning’ system for non-payment of super and take the onus off individuals to alert the ATO when there’s a problem.  However, at the time of writing, this legislation has not been passed.  So for the time being, it’s very important to take an interest in your super and act if you discover that you aren’t receiving your full SG contributions.

Source: Money & Life. 

What to look for on your super statement

By | Financial advice, Superannuation | No Comments

When your super statement arrives it’s important to take a proper look because it could become one of the biggest assets you’ll ever have.

Here’s our quick guide to what you should watch out for and why.

1 – Personal details

Check your name and address are present and correct.  Not having the right details could lead to you having unclaimed super if you change jobs or move house.  You can update these details with most funds by setting up a member login.

2 – Tax file number (TFN)

Having the right tax file number means your super fund will be paying the right rate of tax on your super contributions and investment earnings.  If your TFN is missing or incorrect, the fund may be deducting tax at a higher rate.

3 – Personal contributions

Check for any personal contributions to this super fund for the period the statement covers.  If you haven’t provided your TFN, your fund won’t be able to receive these payments.

4 – Employer contributions

Check that any employer contributions you’re entitled to under the super guarantee (SG) are being paid in full at least once a quarter.

5 – Your balance

Providing either you or your employer (or both) have been making contributions your balance is going to be higher than it was at the beginning of the statement period.  Depending on your investment options, your current balance will include investment earnings too.  And there will be deductions shown for tax, fees and insurance premiums.

6 – Investment options

Most super funds offer a range of investment options.  Your balance is likely to be invested in a default option if you haven’t made an active choice.  Different investment choices carry different levels of risk, expected return and fees.

7 – Fees

All super funds will charge a fee for administering your account.  There will also be fees associated with your investment option/s or brokerage fees for direct investment in shares.  Paying too much in fees can quickly erode your super balance so it’s important to make sure you’re getting enough investment earnings to justify any fees you’re paying.

8 – Insurance premiums

Super funds are required to provide certain types of personal insurance to their members by default and take premiums from your super balance to pay for the cover.  However, legislation proposed in the 2018 Federal Budget will give account holders with lower balances the choice to opt in or out for paying for insurance through their super.

Paying for personal insurance through super can be a way to make your policy more affordable but there are lots of things to weigh up when it comes to getting personal insurance right.

9 – Beneficiaries

If you’ve nominated a beneficiary or beneficiaries for your super – perhaps your spouse, partner or children – then this will be included on your super statement too.

What now?

Taking an interest in your super is important – regardless of your age.  If you’re looking at multiple super statements from different accounts, then it may be worth consolidating your super into a single fund to save on fees.  Before choosing one fund over another, it’s worth checking to make sure you’re continuing to get the right insurance cover and investment options with your preferred super fund and for a competitive fee.

Source: Money & Life October 2018

Super v mortgage – can you guess the winner?

By | Financial advice, Superannuation | No Comments

The pros and cons of using your spare income to either pay more off your mortgage or increase your super need to be weighed up.  The direction you take depends on a few factors such as your age, how much you earn, your level of debt and your income tax rate.

Typically, if you are in your twenties for instance, you may not want to save for a retirement that is 40 years or more away.  A better strategy might be to invest in a home where you can build some equity before you start considering a retirement strategy.

However, the older you get, the more you might want to invest in your superannuation and begin the transition to retirement financially.

Things to consider if you take the mortgage route:

  • Paying no tax on growth in the value of your family home;
  • Access to redraw facilities if you need a quick flow of cash;
  • Equity which you can borrow against;
  • Reliance on the property market as a long-term strategy;
  • Changes to interest rates.

Things to consider if you contribute more to your super:

  • Boosting retirement income;
  • Tax-effective as tax on investment returns is capped at 15%;
  • Tax-effective when you salary sacrifice;
  • Potential benefits of Federal Government co-contributions if you earn less than $51,813;
  • Inability to access funds if you are under retirement age.

Questions to ask yourself

 If you are at the time in life where you feel it’s better to add more to your super, here are some questions to consider:

  • How much do you owe on your mortgage?
    • Sit down and do your sums to figure out how much money is going into repayments, and how long it will take you to pay off your mortgage.
  • How is your mortgage set up?
    • Do you have an interest-only strategy at the moment and how long is the life of your loan?  It might be worthwhile considering if this needs to be changed.  Switching to an interest only loan may also give you more cash-flow that can be invested into your super.
  • Is there cash looking for a better home?
    • You may have more money floating around than you think and some can go into growing your super balance.
  • Do you have the capacity to salary sacrifice?
    • Your employer may allow you to salary sacrifice some of your income which will be taxed at a maximum rate of 15%, saving you a tidy sum in tax if your income is currently being taxed at a higher rate.

Assess your personal situation with Revolution Financial Advisers to identify how much cash you’ve got and whether it could be better placed to give you more money in your retirement.

Source: Colonial and Capstone Financial Planning.

Super investments

Super investment options – what’s right for you?

By | Financial advice, Superannuation | No Comments

Choosing the right super investment options at the right time could make a difference to how much money you have when you retire.

When it comes to your superannuation, the investment options you choose today and in future may impact how much money you retire with.

If you haven’t selected an investment option within your super, you’re probably invested in your fund’s default option, which will generally take a balanced approach to risk and return.

To get you up to speed, we’ve answered some commonly asked questions around how your money is invested, the different options available and how your preferences can affect your investment returns at any age.

What do super funds do with my money?

Typically, no less than 9.5% of your before-tax salary (if you’re eligible) is paid into super, which is then taxed at a maximum of 15%.  Your super fund will invest this money over the course of your working life, so you can hopefully retire comfortably.

Your super fund will let you choose from a range of investment options and generally the main difference will be the level of risk you’re willing to take to potentially generate higher returns.

If you haven’t selected an investment option, your super fund will usually put you into a default option, which generally means your exposure to risk and return is somewhere in the middle.

If you’re not sure what options you’re invested in, contact your super provider.

What are the super investment options I can choose from?

Most super funds let you choose from a range, or mix of investment options and asset classes.  These might include ‘growth’, ‘balanced’, ‘conservative’ and ‘cash’ but the terms can differ across super funds.

Here’s a small sample of the typical type of investment options available:

  • Growth options – aim for higher returns over the long term, however losses can also be notable when markets aren’t performing.  They typically invest around 85% in shares or property;
  • Balanced options – don’t tend to perform as well as growth options over the long term, but the loss is also less when there are market downturns.  They typically invest around 70% in shares or property, with the rest in fixed interest and cash;
  • Conservative options – generally aim to reduce the risk of market volatility and therefore may generate lower returns.  They typically invest around 30% in shares and property, with the rest in fixed interest and cash;
  • Cash options – aim to generate stable returns to safeguard the money you’ve accumulated.  They typically invest 100% in deposits with Australian deposit-taking institutions, such as banks, building societies and credit unions.

Super funds may have different allocations, so it’s important to read your super fund’s product disclosure statement before making any decisions.

What’s the right investment option for me?

Choosing the most suitable investment option generally comes down to your goals for retirement, your attitude to risk and the time you have available to invest.

For instance, if you’re young, you may have more time to ride out market highs and lows, and therefore be willing to take on more risk in the hope of achieving higher returns.

If you’re closer to being able to access your super, you may prefer a conservative approach as a share market crash could be harder to recover from than if you’re 20 years away from retirement.

While many people put off thinking about super, being informed and engaged from a young age and throughout your career may make a big difference to the returns generated and your final super balance.

Source: AMP News & Insights

Who is the boss of your super?

By | Superannuation | No Comments

It’s tempting not to think too much about your super when retirement is still a long way off.  After all, it’s growing just fine by itself … right?  But the reality is, if you don’t take control now, you might be left with less than what you need when it’s time to put it to use.

Here’s how to be the boss of your super in three simple steps.

Step one: Know what you’re entitled to

If you’re working full-time or part-time for an employer, they generally have to make regular Super Guarantee (SG) payments into your super account.  But there are some exceptions, like if you’re:

  • earning less than $450 a month;
  • under 18 and working 30 hours or less a week;
  • doing domestic or private work for 30 hours or less in a week (for instance, if you’re a part-time nanny);
  • an overseas worker temporarily working in Australia and you’re covered by a bilateral superannuation agreement;
  • a non-resident working overseas but paid by an Australian employer;
  • a Reserve Defence Force employee (applicable to some payments only).

SG contributions are calculated as 9.5% of your Ordinary Time Earnings (OTE).  This includes loadings, commissions, allowances and most bonuses, but usually doesn’t include overtime pay.  Your employer also has to keep making SG payments even when you’re on sick leave, annual leave or long-service leave – but not if you take time off for paid parental leave.

Step two: Check that your super is being paid

When you start working for a new employer, they need to give you a Superannuation (super) standard choice form.  This lets your employer know which super fund to pay your SG contributions into.  All you have to do is provide your fund details and account number.

By law, your employer has to start paying SG contributions into your chosen account on a quarterly basis – and they must start paying any amounts that are due within two months of receiving your completed standard choice form.  If you think your employer isn’t making these payments – or they’re paying you the wrong amount – here’s what you can do:

  1. Check your super statement to find out how much your employer has been paying;
  2. Speak directly to your employer about how and when your payments are scheduled;
  3. If you can’t resolve the issue, lodge an enquiry with the Australian Taxation Office and they’ll take steps to investigate.

Step three: Boost your super savings

Employer SG contributions play a vital role in building up your super savings throughout your working life.  But they’re not the only way to grow your nest egg.

You may be able to set up a before-tax contribution from your salary, known as a salary sacrifice arrangement, with your employer.  This means authorising them to take out a fixed amount or percentage of your before-tax income from every pay, which they then deposit straight into your super.  But first, you should speak to your employer about how this arrangement would work for your employment situation.

Alternatively, you can use your own money to make voluntary contributions.  In this case, you may be entitled to claim an income tax deduction on your contributions.

An advantage of salary sacrificing or making personal tax-deductible contributions is that your contributions will be taxed at just 15% in most cases, instead of your usual marginal income tax rate.  However, it’s important to remember that the combined total of your SG payments, salary sacrificed amounts and your personal tax-deductible contributions can’t exceed $25,000 in a financial year or extra tax will apply.

What if you’re self-employed?  You don’t have to pay yourself super, but it’s still a valuable way to save for your retirement.

Source: Colonial First State

How to help ensure your superannuation contributions don’t exceed the caps

By | Financial advice, Superannuation | No Comments

Changes in the superannuation contribution caps, which kicked-in last year, give an added reason to keep a close eye on your contributions.

From 1 July 2017, the concessional (before tax) contributions cap was reset to $25,000 for everyone (irrespective of age).

For those earning a salary in excess of $210,000 or more – the compulsory Employer Superannuation Guarantee of 9.5% will total around $20,000 a year and will see your contributions edge close to the cap.  For those making additional concessional contributions, such as through salary sacrifice – they may be close to reaching the maximum if they are earning $180,000 (including superannuation guarantee) and contributing an extra 3% or earning $150,000 (including superannuation  guarantee) and contributing an extra 5%.  In certain cases, employers will match an employee’s additional contributions and in this case the concessional cap might be exceeded.

Going forward, the concessional cap will increase in increments of $2,500 (not $5,000 as was previously the case).  There is a formula the ATO applies to determine when indexation takes place, and the concessional cap will remain at $25,000 for 2018/19 also.

From 1 July 2017, the annual non-concessional (after tax) contribution cap reduced from $180,000 to $100,000 per year.

However, your non-concessional cap will be nil for a financial year if you have a total superannuation balance greater than or equal to the general transfer balance cap ($1.6 million in 2017–18) on 30 June of the previous financial year.  As a result, if you had more than $1.6m in super at 30 June 2017, you cannot make further non-concessional contributions this year.  You may, however, still be able to make or receive concessional contributions up to the $25,000 cap.

Provided you are under 65, or aged between 65 and 74 and meet the relevant work test, and meet all other requirements, you may be able to make contributions to super this year.  But it is important to monitor your level of contributions as penalties can be imposed where you exceed the relevant caps.

Using the ‘bring forward’ rule for your contributions

There are special circumstances where you may exceed the annual non-concessional cap amount and this is called the ‘bring forward’ rule.  The rules have become more complex since 1 July 2017.

How it works is if you are under 65 and have less than $1.5m in super as at 30 June 2017, you may be able to contribute at least $200,000 as a non-concessional this financial year.  If you had less than $1.4m at that time, you may be able to contribute up to $300,000.  However, you might not be able to do this if you started using the bring forward rule in either of the last two financial years.  Or the amount you can contribute might be reduced.

The amount you contribute this financial year may impact how much you can contribute in future years, and each year you still need to have less than $1.6m (or the relevant general transfer balance cap for that year) in super in order to make further contributions.

Source: BT

Know Your Super

How well do you know your super?

By | Superannuation | No Comments

Recent research shows some interesting insights and a few worrying trends into how Australians view their Superannuation.

The Financial Services Council ING Direct Superannuation Consumer Report shows compelling support for our Super system, with 89% of respondents viewing Super as a means of saving for retirement. Additionally, approximately 72% of respondents were able to say roughly how much they have in their account at the moment. On the other hand, concerning evidence suggests 74% of workers let their employer choose the Fund their Super contributions are paid into (‘default fund’).

Other key findings showed that there is uncertainty over life insurance, with one in four respondents unsure about whether or not they have life cover through their Fund.

48% of respondents were aware they could choose between different investment options and about the same proportion couldn’t state what fees they were being charged by their Super Fund.

The report highlights the fact that many Australians pay little or no attention to their Super, often because the money is unreachable until retirement and thus they don’t see it as something they need to be concerned with yet. However, as Super is likely to be one of your largest assets on retirement, it is actually very worthwhile to spend a bit more time getting “up close” to your Super and ensuring you are aware of your Fund’s details.

As a guide, a worker aged 30 earning a salary of $50,000 annually can accumulate around $324,000 in super savings by age 65 – and that’s just relying solely on employer contributions and assuming average investment returns.

It’s likely that you would have received your annual Super Fund statement in respect of the 2017 financial year. Take a look and review what fees you are paying, if you have life cover through your Fund and what the Fund’s underlying investment strategy is.

Many Australians have their Super in a ‘balanced’ style of Fund with strong exposure to shares. A more conservative, cash-based investment strategy could mean more stable (and lower), returns on your Super over time.

Take an active approach and engage with your Super. To discover more about why Super is such an important investment for your future and how you can maximise its potential, contact Revolution Financial Advisers to make an appointment with us.

know about super

What young people often don’t know about super

By | Financial advice, Superannuation | No Comments

If you’re like 56% of young Australians, you probably couldn’t say exactly how much money you have in superannuation, but according to the Association of Superannuation Funds of Australia (ASFA), what you’ve got in super may easily outweigh what you’ve got in your everyday bank account.

We take a look at the research which also highlights that the majority of those under age 29 strongly support super as a good way to save for retirement, even though many underestimate the amount of money they’ll need after they finish working.

How much the average young person has in super

ASFA found around 25% of Australians aged 15 to 19 had a super account, as did approximately 75% of those aged 20 to 24.3

While average balances were not that large, ASFA said they were rather substantial compared to what most young people had in their bank account.

ASFA pointed to figures from the Australian Bureau of Statistics, which showed the average super balance for those aged 20 to 24 was around $5,000, with that figure escalating to more than $16,000 for 25 to 29-year-olds.

What additional findings revealed

Key points from the ASFA research showed:

  • More than 60% of young Australians have multiple super accounts, with 30% reporting trouble in finding their old accounts;
  • Young people who have multiple accounts are potentially at risk of eroding their super savings because they’re paying multiple sets of fees and charges;
  • Nearly 10% of Australians under 29 are checking their super balance daily, which is important as it’s likely to be one of the biggest investments they’ll ever have;
  • On average, young people expect they’ll need $625,000 to retire, while those aged 60 and over expect they’ll need a much bigger sum of around $1 million.

Super tips for young people

  • If you earn more than $450 in a calendar month, your employer is required to make super contributions to a fund on your behalf at the rate of 9.5% of your earnings.
  • If you’re under 18, contributions are only payable if you work more than 30 hours a week.
  • If you are employed, you should check your payslip and your super account transaction records to make sure you are getting the contributions you are legally entitled to.
  • If you aren’t getting what you think you are owed, speak to your employer.  The Australian Taxation Office can also help you with information and in recovering any unpaid contributions, with non-payment of super affecting about 690,000 Australians annually.

What about insurance inside super?

Each super account you have will typically have a fixed administration charge of at least $100 a year and if you’ve taken out insurance through super, premiums will also be deducted from your balance.

While more than 70% of Australian life insurance policies are held inside super, and it may be beneficial for you depending on your circumstances, you should regularly review your preferences, as more than 25% of people under age 29 are unsure whether they have cover, let alone the right type.

Where to go for help

While retirement might seem like a lifetime away, remember, the more informed you are about super from a young age, the better off you may be down the track.

Revolution Financial Advisers can help you review and understand your current superannuation position.  Contact us to make an appointment.

 Source: AMP News & Insights

Superannuation contributions

Upsize your super with downsizer contributions

By | Superannuation | No Comments

During January 2018 legislation passed that will enable people aged 65 or over to make additional super contributions of up to $300,000 per person from the proceeds of the sale of their home from 1 July 2018. These are known as ‘downsizer contributions’ and they can be made on top of the existing contribution caps, without having to meet certain contribution rules and restrictions.

The opportunity

The downsizer contribution rules remove some of the barriers that prevent or restrict the ability to make super contributions at age 65 or over.

Provided certain other conditions are met (see below) eligible people will be able to contribute up to $300,000 per person (or $600,000 per couple) from the proceeds of selling their home on or after 1 July 2018.

The contributions won’t count towards the concessional (pre-tax) or non-concessional (after-tax) contribution caps and there is no maximum age limit. Also, the ‘work test’ (for people aged 65 to 74) and the ‘total super balance’ test won’t apply.

Key requirements

There are a number of conditions that will need to be met to be eligible to make downsizer contributions, including:

  • The individual must be aged 65 or over at the time the contribution is made;
  • The property must have been owned by the individual or their spouse (but not necessarily both) for at least 10 years prior to the disposal;
  • The contract for sale must be entered into on or after 1 July 2018;
  • The property must qualify for the main residence capital gains tax exemption in whole or part, so properties held purely for investment purposes won’t qualify;
  • The contribution must be made within 90 days of the change of ownership;
  • An election needs to be made to treat the contribution as a downsizer contribution;
  • No tax deduction can be claimed for the contribution.

Other conditions may also apply. For more information, please visit the ATO website at https://www.ato.gov.au/

Key considerations

There are some key issues that should be considered when assessing whether making downsizer contributions could be a suitable strategy, including:

  • The property being sold to fund the contributions doesn’t have to be the current home. It can be a former home which meets the requirements. Also, a new home doesn’t need to be purchased;
  • Once contributed, downsizer contributions will count towards the ‘total super balance’ which could impact capacity to make future contributions;
  • Downsizer contributions can’t be transferred into a tax-free ‘retirement phase income stream’ if the ‘transfer balance cap’ has been used up. The transfer balance cap is $1.6 million in 2017/18;
  • If the transfer balance cap has already been used up, the contribution must remain in the ‘accumulation phase’ of super, where investment earnings are taxed at a maximum rate of 15%;
  • Money held in the accumulation or retirement phase of super is assessed for both social security and aged care purposes.

Could you benefit from downsizer contributions?

If you are thinking about selling your home after 1 July 2018, Revolution Financial Advisers can help you decide whether making downsizer super contributions is a suitable strategy for you and assess other options.

Boost your retirement income with salary sacrifice

Boost your retirement income and save tax with salary sacrifice

By | Superannuation | No Comments

By contributing into your super, you can reduce the amount of tax you pay while adding to your future retirement income.

What is salary sacrifice?

Put simply, salary sacrifice is where you pay a portion of your pre-tax salary or wages as an additional contribution to your superannuation account.

How does it benefit you?

When you choose to make super contributions through a salary sacrifice arrangement, the key benefits for you are:

You can pay less tax – If your annual income and concessional (before-tax) contributions total less than $250,0001, these super contributions are taxed at a rate of 15 per cent, which will generally be less than your marginal tax rate of up to 47 per cent.

You can add to your super more efficiently – If your marginal tax rate is above 15 per cent, every dollar from your pre-tax pay you put into super through salary sacrificing is worth more to you than that dollar in take-home pay, making it a tax-effective way to boost your super.

You choose the contribution amount – The amount of pre-tax pay that is salary sacrificed into your super can be adjusted to your budget which could help you maintain your current lifestyle. Adding even a small amount a fortnight could potentially increase your super balance at retirement. However, if you earn below $37,000 there may be limited advantage in a salary sacrifice arrangement. Instead, as a low-income earner you can take advantage of the government’s low-income super contribution (LISC) which is a payment of up to $500 per annum directly into your super fund.

How much can you salary sacrifice?

The current annual cap for concessional (before-tax) contributions, including salary sacrifice contributions and employer Super Guarantee (SG), is $25,000.

It’s important to note that any contributions made above the maximum concessional contributions cap will be taxed at your marginal tax rate (plus Medicare). There will also be a charge to cover the cost of collecting this tax later than normal tax.

How can you get started?

Step 1: Contact your payroll or human resources team to confirm whether they offer salary sacrificing.

Step 2: If they do, you need to look at your income and expenses, and calculate how much of your income you can comfortably give up now and invest for your future. That’s where a financial adviser can help you find the most suitable option for your individual financial situation.

Step 3: Then, if you decide to salary sacrifice into super complete the relevant form so your employer can redirect the agreed portion of your pre-tax pay to your super fund. If they don’t have a form it’s best to get this agreement in writing to ensure you can confirm the terms, to avoid any confusion.

What else do you need to know?

Don’t lose your super entitlements – Your salary sacrifice contribution is counted towards your employer contributions. As such, your employer is only required to make super guarantee (SG) payments into your super equal to 9.5 per cent of your pre-tax salary.

To avoid losing any of your entitlements, the Australian Taxation Office recommends that you clarify the terms of your salary sacrifice agreement if you want to ensure your employer still pays you the 9.5 per cent super guarantee.

Salary sacrifice is voluntary – If your employer doesn’t offer or agree to salary sacrifice arrangements and you are under the age of 75, at the end of each year, subject to the concessional contributions cap, and taking into account any previously-made super contributions for that financial year you may be able to contribute to your super account.

Get the right advice

Everyone’s financial situation is different. That’s why it’s a good idea to speak to a financial adviser who can help you secure your retirement income for the future.

Source: Colonial first State

1 If your income plus your before-tax super contributions are greater than $250,000, you’ll need to pay an additional 15 per cent tax on the salary sacrifice contributions that take your income over $250,000.

Downsizing can be an excellent strategy to supplement your income

Would downsizing be worthwhile for you?

By | Self-Managed Superannuation Funds, Superannuation, Wealth Creation and Accumulation | No Comments

It seems to make logical sense. You retire, sell the now cavernous family home, buy a cosier place and use the cost difference to boost your retirement income – win-win right? The answer is – “it depends.”

Downsizing can be an excellent strategy to supplement your income and simplify your lifestyle, but it’s not right for everyone.

Here’s what you need to consider to see if downsizing is the right move for you.

Where you could save

Super: If you own your home outright and choose to downsize, that extra money could substantially improve your retirement income. The attraction of contributing money into super is that investment earnings on money in a super fund are generally taxed at 15%, representing a potential tax saving of up to 34%. This is because when you hold an investment outside super, the earnings are generally taxed at your marginal tax rate which could be up to 49%.

Also, as part of the May 2017 budget changes, the Government announced that individuals who are home owners can, from the proceeds of sale of their principal place of residence, each contribute up to $300,000 to superannuation. This special superannuation contribution will not be affected by the work test and can still be made even if they have a total superannuation balance of $1.6m or more.  However, there are a number of preconditions. First, the sale of the principal place of residence must occur after 1 July 2018; Secondly, the member making this special contribution must be aged 65 or more; Thirdly, the principal place of residence must have been held for 10 or more years. Finally, the downsizing contributions can be made even if the total superannuation balance already exceeds $1.6m.

Mortgage: If you’re still paying off your home, downsizing could help you minimise your repayments or eliminate them entirely. You could even downsize and continue to make the same repayments to pay off your mortgage much sooner.

Utilities: A smaller home typically runs more economically. Why pay to heat or cool space you no longer need? If your new home provides renewable energy options such as solar power, you may even be able to sell energy back to the grid and make money.

Maintenance: Less space to occupy means less space to maintain. In the case of larger properties, downsizing could offer substantial savings on cleaning and garden maintenance.

Travel: Downsizing can help you relocate to a more convenient location. If the local shops, public transport and amenities are all within walking distance, you could make substantial savings on fuel.

Garage sale: Selling your home is a great time to sell any items you no longer want, need, or will fit into your new house. Any money you make could be contributed towards moving costs.

Costs to consider

Home value: If you sell your home during a market lull, you could lose some or all of the equity you’ve built up. This could eat into, or erase entirely, the cost saving you make by purchasing a less expensive property.

Fees and commission: Home selling is a highly competitive market. To ensure your home is positioned favourably to sell, you may need to appoint a real estate agent and potentially pay for marketing services, which can cut into your profit margin.

Moving costs: If it’s been a while since your last move, you might be surprised at how much it costs to pack up and transport all of the items you’ve accumulated. That’s why it’s a good idea to offload all the items you can live without before your move. Why pay to transport items you no longer need?

Strata fees: If you purchase an apartment you’ll have to pay quarterly strata levies. Although these fees can end up saving you money in the long term, compared to paying for the maintenance of your home and yard, they will eat into your profit margin in the short term.

Stamp duty: You’ll have to pay stamp duty to buy a new home or apartment so you’ll need to include this cost in your calculations.

Storage costs: One drawback of buying a smaller home is you have less space to store your treasured belongings. If you run out of room, you may need to purchase additional storage which can add up quickly.

Doing the sums

Balancing the potential savings and costs of downsizing can be tricky, and that’s before you take all the potential lifestyle impacts into consideration. At Revolution Financial Advisers, we can help you work out if downsizing makes sense for you as a part of a tailored financial plan.

Source: MLC

Understand your superannuation

Understand your superannuation

By | Superannuation | No Comments

The goal of superannuation is to accumulate money to provide you with an income in retirement. To achieve this, the fund will normally invest in a wide range of assets.

Due to the long-term nature of the investment this will usually include shares, property, bonds, cash and other types of assets. These will be both Australian and international in order to provide further diversification.

This is your retirement income so it is essential you take an interest in your super fund and its investment options particularly when there is so much choice.

Some important points to consider:

  • Most super funds offer a choice of investment strategies. Study the options and select the one most appropriate to your circumstances and goals;
  • Because of the long-term nature of your investment it is important to include “growth” type assets such as shares and property. Even if their short-term performance is unknown, they will invariably provide a better return over periods of 5-10 years and more;
  • By having a diversified range of investments you minimise the risk of poor returns from one asset class;
  • Just because you are nearing retirement doesn’t mean you should have a short-term strategy – you may well be drawing a pension from your super account for the next 20-30;
  • Remember that superannuation is not an investment in itself – it is a tax structure. The investments are held within the super fund and the fund is taxed at concessional rates to encourage you to save for retirement. But you have the choice of how to invest.

Superannuation can be confusing or boring to many people but don’t forget your quality of life in retirement depends upon it – it’s too important to ignore.

Make an appointment with us to explore your options further and take control of your superannuation.

Things to consider to Boost your Super.

Boost your Super in 3 easy steps

By | Superannuation | No Comments

Want to see your super grow faster? Here’s how you can — by choosing what happens to compulsory contributions from your employer.

Make the super payments from your employer go further by choosing an investment strategy that suits your stage of life and retirement goals. Boost your super by salary sacrificing part of your income to supplement your employer contributions. By rolling over all your super into one account, you can save on fees and maximise your savings.

Putting money into your super can be a great way to secure your future, and in Australia, we’re lucky to have a system that helps us grow our retirement savings through compulsory contributions from our employers. These are known as superannuation guarantee (SG) payments.

Even though SG payments are your employer’s responsibility, that doesn’t mean you should ‘set and forget’ your super. If you leave all the decisions to your employer and your super provider, you may not get the greatest benefit from these compulsory contributions. That’s why it’s worth taking a proactive approach towards growing your nest egg. Here are three things you can do today to make your SG payments from your employer work harder for you in the long run.

Step 1: Consolidate your super

Have you got all your super in one place? If you’ve changed jobs, different employers might have made your SG payments to different funds over the years. This means you could have ‘lost super’ in accounts you’ve forgotten about. Before you switch, make sure you understand what this means for any personal insurance you hold through your super. You should also check if you’ll be charged any fees for leaving your current fund. We would always recommend seeking the assistance of a financial adviser before consolidating your super funds.

If your super is in multiple funds, you also have to pay separate administration fees to each fund, which eats into your retirement savings. On the other hand, if you roll over all your super into a single fund, you’ll not only save on fees but you’ll also find it easier to keep an eye on your money.

Luckily, it’s simple to track down and consolidate your super by setting up a MyGov account online.

Step 2: Tailor your investment mix

Once you have all your super in the one place, you should decide how you want to invest it.

While your employer keeps making SG contributions, your super will continue to grow. You can make these payments work even harder by choosing an investment strategy that’s right for your life stage. To do this, you need to consider your retirement goals and how long you have to reach them.

When you’re young and have many years of work ahead of you, you also have enough time ahead to ride out the highs and lows in investment markets. This means you could take advantage of a growth investment strategy with the potential to deliver higher returns over the long term.

On the other hand, if you’re planning to retire and cash in your super in the next five years or so, then it may make sense to choose a more conservative investment strategy. Your returns will probably be lower than with a growth option, but they’re also likely to be more stable.

Step 3: Add a little extra to your super

Although the contributions you receive from your employer will make a big difference to your retirement savings, they’re not the only way to build up your super. You can supplement your employer’s SG payments by salary sacrificing part of your pre-tax income — which will make your super grow even faster.

To set up a salary sacrifice arrangement, ask your employer to deposit a part of each pre-tax earnings into your super account. You can choose how much you’d like to put in — up to a maximum of $25,000 per year.

Every extra bit that you put into your super now will pay off in the future. What’s more, you could also make a major tax saving, since the amount you salary sacrifice will be taxed at the low rate of 15%. Before you consider adding more into your super, make sure you understand the different types of contributions made into your super fund as the Government has set limits to how much you can contribute.

Get help from an expert

When you’re planning for your retirement, it can be hard to know if you’re making the right financial decisions. That’s where we can help.  To find out how you can boost your super, please contact Revolution Financial Advisers to make an appointment and discuss your situation with us.

Source: Colonial

Difference between a Super and Mortgage.

Super v Mortgage

By | Superannuation | No Comments

The pros and cons of using your spare income to either pay more off your mortgage or increase your super need to be weighed up. The direction you take depends on a few factors such as your age, how much you earn, your level of debt and your income tax rate.

Typically, if you are in your twenties for instance, you may not want to save for a retirement that is 40 years or more away. A better strategy might be to invest in a home where you can build some equity before you start considering a retirement strategy.

However, the older you get, the more you might want to invest in your superannuation and begin the transition to retirement financially.

Things to consider if you take the mortgage route:

  • Paying no tax on growth in the value of your family home;
  • Access to redraw facilities if you need a quick flow of cash;
  • Equity which you can borrow against;
  • Reliance on the property market as a long-term strategy;
  • Changes to interest rates.

Things to consider if you contribute more to your super:

  • Boosting retirement income;
  • Tax-effective as tax on investment returns is capped at 15%;
  • Tax-effective when you salary sacrifice;
  • Potential benefits of Federal Government co-contributions if you earn less than $51,813;
  • Inability to access funds if you are under retirement age.

Questions to ask yourself

 If you are at the time in life where you feel it’s better to add more to your super, here are some questions to consider:

  • How much do you owe on your mortgage?
    • Sit down and do your sums to figure out how much money is going into repayments, and how long it will take you to pay off your mortgage.
  • How is your mortgage set up?
    • Do you have an interest-only strategy at the moment and how long is the life of your loan?  It might be worthwhile considering if this needs to be changed.  Switching to an interest only loan may also give you more cash-flow that can be invested into your super.
  • Is there cash looking for a better home?
    • You may have more money floating around than you think and some can go into growing your super balance.
  • Do you have the capacity to salary sacrifice?
    • Your employer may allow you to salary sacrifice some of your income which will be taxed at a maximum rate of 15%, saving you a tidy sum in tax if your income is currently being taxed at a higher rate.

At Revolution Financial Advisers we can help to assess your personal situation to identify how much cash you’ve got and whether it could be better placed to give you more money in your retirement.