Retirement
How the new contribution rules could boost your super
By utilising the new deductible contribution rules and committing to tipping money into super early, plenty of Australians can achieve a balance of $1 million by age 65, says HLB Mann Judd.
How the new contribution rules could boost your super
By utilising the new deductible contribution rules and committing to tipping money into super early, plenty of Australians can achieve a balance of $1 million by age 65, says HLB Mann Judd.
The rule changes to super on 1 July 2017 have made it much easier to make additional contributions to super, says HLB Mann Judd wealth management partner Jonathan Philpot.
One of the pivotal changes has been to deductible contributions to super. Before 1 July 2017, only self-employed people could claim personal super contributions as a tax deduction.
But according to the Australian Taxation Office, "most people under under 75 years old will [now] be able to claim a tax deduction on personal superannuation contributions".
Mr Philpot says that means Australians can use personally deductible contributions to start building their super balances from a much younger age.
"In the past, employees had to elect to salary-sacrifice in order to make additional superannuation contributions and receive the associated tax savings. Now, people earning salary and wages are able to make voluntary contributions to superannuation on their own behalf and claim a tax deduction in their personal tax return," Mr Philpot said.
"In fact, people will need to start consciously building their superannuation in their 40s, and should be trying to contribute as close to the maximum of $25,000 a year as they can, as their main form of long-term savings.
"By making additional deductible contributions through to age 65, people can significantly grow their super balance and potentially get it well above a million dollars," he said.
Mr Philpot gave an example of a 40-year-old with a super balance of $100,000 who commits to making the maximum concessional contribution of $25,000 a year, laid out in the table below.
In contrast, he said, a 50-year-old with the same opening balance would be significantly worse off:
"For most people in their 40s, repaying the home mortgage is — understandably — the main focus. While this should continue to a be a focus, once people have their mortgage under control, it is worth considering using the offset account to make additional concessional contributions to super," Mr Philpot said.
"Relying solely on the superannuation guarantee contribution of 9.5 per cent is unlikely to allow most people to save enough for a comfortable retirement – something that many people still seem to be unaware of."
He added that the new changes to superannuation contributions doesn’t automatically spell the end of salary sacrifice arrangements.
"The changes don’t necessarily mean people should cease their salary sacrifice arrangements, as they have two main benefits.
"Firstly, it is an automated savings option, making it easier for people to chip away at growing their wealth as it can be a struggle to come up with funds at year end to contribute to superannuation.
"Secondly the tax benefit is immediate, as it is pre-tax dollars that are salary sacrificed, whereas when using the personal contribution method people have to wait until lodging their tax return for the tax refund," Mr Philpot said.
RELATED ARTICLES
Superannuation
Superannuation guarantee rate rises to 12 per cent as parental leave changes take effect
The superannuation guarantee rate has increased from 11.5 per cent to 12 per cent from Tuesday, with super contributions also being added to Commonwealth Parental Leave Pay for the first time. Read more
Superannuation
Rest's Sustainable Growth option achieves highest sustainability classification
Rest superannuation fund has achieved the highest sustainability classification for its Sustainable Growth investment option from the Responsible Investment Association Australasia. Read more
Superannuation
Aware Super slashes admin fees for retirees by up to 25 per cent
Aware Super has reduced administration fees for members with a retirement income account by up to 25 per cent and lowered the maximum annual fee. Read more
Superannuation
SuperAPI co-founder criticises Labor's superannuation tax as 'sneaky tax on young people'
The co-founder of SuperAPI has labelled Labor's proposed tax on superannuation balances above $3 million as a "sneaky tax on young people, tomorrow" disguised as a policy targeting wealthy retirees ...Read more
Superannuation
Election policies could reshape Australia's superannuation landscape, expert warns
Competing superannuation policies from Australia's major political parties could have significant implications for investors and retirees, according to a financial expert. Read more
Superannuation
Industry leaders weigh in on concessional super tax as Budget confirms $55bn investment
Changes to the taxation of superannuation earnings and contributions have drawn mixed responses from financial and payroll sector leaders, as the Federal Budget confirms over $55 billion in ...Read more
Superannuation
Call for indexation on super tax cap as $3m threshold draws criticism
A senior executive in the superannuation technology sector has criticised the Federal Government for failing to index the proposed $3 million superannuation tax cap, arguing the measure will unfairly ...Read more
Superannuation
Rest members back calls for fairer superannuation rules ahead of Federal Budget
Rest has called on the Federal Government to implement superannuation reforms aimed at improving fairness across the system, after member survey results showed strong support for a range of proposed ...Read more
Superannuation
Superannuation guarantee rate rises to 12 per cent as parental leave changes take effect
The superannuation guarantee rate has increased from 11.5 per cent to 12 per cent from Tuesday, with super contributions also being added to Commonwealth Parental Leave Pay for the first time. Read more
Superannuation
Rest's Sustainable Growth option achieves highest sustainability classification
Rest superannuation fund has achieved the highest sustainability classification for its Sustainable Growth investment option from the Responsible Investment Association Australasia. Read more
Superannuation
Aware Super slashes admin fees for retirees by up to 25 per cent
Aware Super has reduced administration fees for members with a retirement income account by up to 25 per cent and lowered the maximum annual fee. Read more
Superannuation
SuperAPI co-founder criticises Labor's superannuation tax as 'sneaky tax on young people'
The co-founder of SuperAPI has labelled Labor's proposed tax on superannuation balances above $3 million as a "sneaky tax on young people, tomorrow" disguised as a policy targeting wealthy retirees ...Read more
Superannuation
Election policies could reshape Australia's superannuation landscape, expert warns
Competing superannuation policies from Australia's major political parties could have significant implications for investors and retirees, according to a financial expert. Read more
Superannuation
Industry leaders weigh in on concessional super tax as Budget confirms $55bn investment
Changes to the taxation of superannuation earnings and contributions have drawn mixed responses from financial and payroll sector leaders, as the Federal Budget confirms over $55 billion in ...Read more
Superannuation
Call for indexation on super tax cap as $3m threshold draws criticism
A senior executive in the superannuation technology sector has criticised the Federal Government for failing to index the proposed $3 million superannuation tax cap, arguing the measure will unfairly ...Read more
Superannuation
Rest members back calls for fairer superannuation rules ahead of Federal Budget
Rest has called on the Federal Government to implement superannuation reforms aimed at improving fairness across the system, after member survey results showed strong support for a range of proposed ...Read more
