MUCH has been written about the superannuation rules starting from July, especially the $1.6 million limit on pension accounts and the non-tax-deductible contribution cut from $180,000 to $100,000 per year.
However the normal, smaller, tax-saving, wealth-building opportunities are more important to large numbers of Australians every year. With this year about to conclude now is the time to act.
The most urgent option is for self-employed people and small business operators. The Government provides tax deductions to encourage them to contribute to super for their retirement. They have two weeks to get some money into their fund.
These people don’t have an employer making compulsory contributions for them. It’s up to them to do it. If they don’t they run the risk of being the retired poor. Employees have no choice, their employer must contribute 9.5 per cent of their income.
How many self-employed people put that much in? Not many. It’s easy to say “I can’t afford it this year, I’ll do it next year”. That’s how they get behind. Most have some catching up to do.
The tax-deductible limit this year is $30,000 for people under 50 and $35,000 for those older. From July the limit will be $25,000 for everyone.
Those who can afford the full amounts should contribute now. Those who cannot should get what they can into super now. Small business people operating via companies should arrange for their companies to contribute for them. Regular small contributions can give big payoffs.
The Government co-contribution scheme can earn low- and middle-income earners a $500 contribution to their super from the Government. It isn’t a huge sum but it is free money.
Employees and the self-employed who have taxable income below $36,021 and contribute $1,000 of after tax pay or savings to super will receive $500 from the Government. People whose income is more than that but less than $51,021 will receive a reduced payment.
People who contribute and earn the Government payment every year will find the scheme provides a handy boost to their retirement savings over the long term.
Taxpayers who have a low-income spouse can reduce their tax bill by contributing to their spouse’s super fund. If the spouse’s taxable income is less than $10,800 and they contribute $3,000 they can deduct $540 from their tax bill.
If they contribute less or the spouse’s income is up to $13,800 they will receive a reduced tax rebate. Non-tax-deductible personal super contributions also offer opportunities. It pays to understand all the options to reduce tax and boost super savings.