SUPERANNUATION
WHY IS SUPER SO IMPORTANT?
You might think of super as just a percentage of your salary that you can't access. But it's important to remember – it's your money, it's just being held for you until you retire. The main idea behind superannuation is to help you build a nest egg which you then use to create an income in retirement (or semi-retirement).
WHY DO I NEED SUPER?
Our population is ageing rapidly and the Age Pension may not be enough.
Super is compulsory for employees. Superannuation Guarantee (SG) contributions were introduced to help us take control of our retirement.
The AMP Superannuation Adequacy Index (June 2009) found that more than 40% of workers – more than four million people – will not have enough money in retirement.
SG contributions over 40 years will provide you with just over half of your pre-retirement income.
Will this be enough? We think you need 65% of your pre-retirement income to retire comfortably. The best place to start is to ask 'How much do I need?
The next step is to use our AMP super simulator to see how you're tracking and determine what strategies you can use to reach your goals.
MAKING A CONTRIBUTION
Deposits into super are known as 'contributions'.
There are two types of contributions. They can be made from your:
Generally, concessional contributions (made from pre-tax income) attract a contributions tax of 15% (30% if you earn over $300,000 pa), which can be significantly lower than your marginal tax rate. There is no contributions tax on non-concessional contributions.
There are caps on both types of contributions, some which vary depending on your age.
BENEFITS
MORE FLEXIBILITY
Super is becoming more flexible with more strategies and ways to reach your retirement goals:
HOW TAX-EFFECTIVE IS SUPER?
For most people, saving through super can be much more tax effective than saving the same amount outside super. Firstly, any contributions your employer makes (up to a certain limit) and any returns on your super are taxed at a maximum of 15%, rather than your marginal tax rate which could be as high as 46.5%.
Additional spouse contributionsIf you even out the super contributions between yourself and your spouse you may save in tax when you convert your super into a pension.Access your super while still workingIf you're over 55 and working part time you can now access up to 10 per cent of your super in the form of a pre-retirement pension and still be able to contribute to super.Super splitting with your spouseIf your spouse earns less than $10,800 and you add to their super you could receive a tax rebate of up to $540.Salary sacrificeIf you arrange for contributions to be made to superannuation from pre-taxed salary above the superannuation guarantee payments contributed by your employer, you will pay a maximum 15% tax (30% if earning over $300,000 pa) on the extra contributions rather than your marginal tax rate (up to a certain limit or cap).Co-contributionsIf you earn less than $48,516 and make additional contributions to your super, the government could match 50% of your contribution (up to $500).Small business capital gains tax (CGT) concessionsIf you own a small business, the proceeds of the sale of certain assets may be contributed to super so you can minimise CGT as well as maximise your retirement savings. A lifetime limit of $1.315 million applies to these amounts.Roll your super over into an allocated pension when your retireIf you use your super to start an 'allocated pension' (also known as an 'account based' pension) rather than cash it in, you can save tax on the lump sum (if under age 60). Another benefit is that the returns on your allocated pension are not taxed.Pension payments and withdrawals over 60If you are 60 or over your pension payments and lump sum withdrawals are not subject to tax where paid from a taxed superannuation fund.
NOTE There are caps on the amount of concessional (before tax) and non-concessional (after tax) contributions you can make each year. Please contact us if you would like to know more about what the caps are and how they work.
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