Don’t make a super blooper
October 2009

Only two to three percent of retirees will have retirement income from their superannuation of more than $40,000 per year, even after compulsory 9 percent contributions have been made for their entire working lives.

That’s the expectation of the Australian Government Treasury Department (Australian Financial Review, Row over super savings, 16 September 2009).

According to the Australian Financial Review article, Treasury also estimates that 80 percent of people aged over 65 receive some or all of the age pension; this will be an increasing burden on tax payers with Australia’s ageing population.

But the earlier you implement a strategy for making additional contributions to superannuation, the more likely it is that your super will meet your needs for retirement—and now’s a good time to get started.

Although superannuation funds reported six consecutive months of negative returns to February 2009, at the end of August the picture had improved, with six months of positive returns (The Australian, Rising sharemarket backs six month in a row of gains, 22 September 2009).

U.C.I.S Financial Planning can discuss with you appropriate strategies to build your super, which could include:

• salary sacrifice contributing to your super from your pre-tax income can be a tax effective option for building up your super. That’s because salary sacrificed contributions are taxed at 15% (rather than your marginal income tax rate). Salary sacrifice also reduces your assessable income, which may even reduce your tax rate.
• Government co-contribution if you earn less than $61,920 and make after tax contributions to your super, your super could benefit from a contribution from the Government. If your salary is $31,920 or less, you’ll receive $1 for every $1 you contribute, up to $1,000. This amount reduces on a scale until your salary reaches $61,920.
• non-concessional contributions contributing funds from your after tax income can help boost your super over the long term. These contributions are not taxed when your super fund receive them.
• spouse contributions you could claim a tax offset for making contributions to your spouse’s superannuation, if their income is less than $13,800.

But it’s important to have a plan in place—from 1 July 2009, new superannuation contribution limits were introduced, so it’s important to make sure you don’t exceed these limits or you could face contribution cap breach penalties.

Discuss with U.C.I.S Financial Planner Quintin Buchel whether your superannuation will be enough to continue your lifestyle in retirement, Contact us.