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Superannuation is important because it may be your only means of financial support in retirement.

Superannuation is specifically designed to give you a tax-effective means of savings for retirement, and it pays to look after it. Try to choose a flexible super fund.

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  A Basic Retirement versus a Great Retirement

Wouldn't you like to enjoy your future without having to worry about money? Unfortunately most people have a huge shortfall in their retirement savings.

Your employer's compulsory Superannuation Guarantee (SG) contributions are unlikely to give you a comfortable retirement.

But if you start contributing to your super now you can make more of your retirement later.

  Super Tax Advantages

Superannuation is one of the most tax effective ways to save for your future.

Your contributions are taxed at up to 15%^ which is much lower than most of the marginal tax rates.

The tax paid on the fund earnings again is only up to 15% instead of up to 49%* on other investment earnings outside of super. If your super is then taken as a lump sum or converted to a retirement income stream there are further tax concessions.

Because of the concessional tax treatment enjoyed by super, there are limits on how much you can contribute each year.

Firstly, there are two types of contributions you can make to super; concessional (or pre-tax) contributions and non-concessional (or after tax) contributions.

^The contributions can be taxed an additional 15% if you are a very high income earner. * Including the 2% Medicare Levy and the 2% Temporary budget repair Levy.

  Concessional Contributions

Concessional contributions are made with pre-tax money and from 1 July 2017 are limited to $25,000 per person per year. This type of contribution includes the superannuation guarantee (SG) contributions made by your employer on your behalf and any additional salary sacrifice contributions you choose to make.

It's important to remember that concessional contributions include SG, any personal deductible contributions or any salary sacrifice contributions you make. It will be important to monitor how much you contribute under these arrangements; if you exceed the new limit, you could incur penalty tax.

  Non-concessional Contributions

Non-concessional contributions are those made with after tax money and for the 2016/17 year, you can contribute up to $180,000 per person per year. From 1 July 2017 the amount changes to $100,000 contribution per person per year (or up to a maximum $300,000 using the bring-forward) as long as the person’s total superannuation balance is under the $1.6 million total superannuation balance (as at 30 June 2017).

This area has become complex with a number of changes taking effect. Our Financial Planner will be able to go through these changes with you and advise relevant to your situation.

  Receive a Super co-contribution from the Government

Do you earn less than $51,021? If so, you may be eligible to receive a co-contribution from the Government? For every dollar you contribute to super, the Government will match it with a co-contribution of $0.50, up to a maximum of $500. The co-contribution reduces by 3.33 cents for every dollar of income over $36,021 per year and phases out completely at $51,021 per year.

  Salary sacrifice isn't really a sacrifice at all

If your employer permits it, a salary sacrifice strategy allows you to 'sacrifice' some of your salary to your super. The benefits of this are twofold:

  • Firstly, your salary reduces by the amount you contribute to super, so you could end up paying less in tax and, depending on how much you contribute, you could even drop down a tax bracket
  • Super contributions are taxed concessionally at up to just 15%* compared to your marginal rate, so you end up paying less in tax twice!

Any contributions you make under a salary sacrifice arrangement will be included as assessable income for the purposes of Centrelink and for certain tax benefits.
A financial planner can help you identify appropriate super strategies for you.

* A 30% contributions tax applies to contributions for high income earners.

  Access your Super while you are still working

As long as you have reached your 'preservation age', a transition to retirement pension allows you to access up to 10 per cent of your super while you are still working and can be used in one of two ways: either to give your super one last boost before you retire or to help you ease into retirement sooner.

By using some or all of your super to purchase a transition to retirement pension you can then make salary sacrifice contributions to your super and use the pension income to supplement your reduced salary. With the reduced contribution limits, it will be important to monitor the level of contributions you make.

Alternatively, if you are wanting to reduce your working hours and ease into retirement, you could simply use the transition to retirement pension income to supplement your reduced salary. It's important to understand that this strategy will reduce your superannuation balance.

  Contribute on behalf of your Spouse

If you have a non working or low income earning spouse, you could contribute in after-tax dollars to super on their behalf and receive a generous tax rebate (conditions apply).

  Your Super, your choice

It is beneficial to understand where and how your super is invested because you do have a choice.

Eligible employees can choose the super fund to which their employer's compulsory SG contributions are made. With 'choice of fund', you may no longer need to change funds when you change employers.

  Investing Super wisely

It is also important to ensure your super is invested in line with your personal circumstances and objectives, including your risk profile, performance objectives and investment timeframe. Rather than simply investing in the default fund, you can select the way your super is invested. If your super is primarily in cash or other conservative investments you may be missing out on higher returns that could be generated from a larger allocation to growth investments (such as shares). If you have a longer time over which to invest you may like to consider more growth oriented investments.

Super is a long term investment and, in times of downturn, it's important to remember the fundamentals of investing; share markets are cyclical and eventually value will be restored. History has shown that shares have the potential to outperform all other asset classes over the long term. Learn about the fundamentals of investing so you can make the most of your super investment, rather than missing out on opportunities.

  Consolidate your Super

Do you have more than one super account, perhaps from changing jobs over the years? Consolidating your multiple accounts could save you money in fees and charges. A larger combined account balance may also generate a greater return.

If you want to find out more about how to make the most of your super, make an appointment with our financial planner - your initial consultation is complimentary and obligation-free.

  Small Super funds

If you want more control over your super, and you have a balance of at least $250,000 to invest, there are two small super fund options you can consider – either a self-managed superannuation fund (SMSF) or a Small APRA Fund (or SAF). However, it's important to remember that with more control generally comes more responsibility.

  Self-Managed Super Funds (SMSF)

Self managed superannuation is a vehicle that gives you freedom of investment choice allowing you to take greater control of your retirement.

An SMSF, also known as a DIY fund, is a super fund with four or less members, where each member of the fund is a trustee or the director of a corporate trustee. Each trustee therefore controls the investment of their contributions and the payment of their benefits.

Whether an SMSF is suitable will depend on your circumstances.

Part of the attractiveness of SMSFs is that they give you access to a large variety of investments not typically available through other superannuation funds. For example, you may invest in private assets such as artwork.

They also provide a way for family members (as the trustees) to combine their retirement savings in the one fund.

If you have your own business, an SMSF can be attractive because you use it to acquire or purchase your business real property into the fund.

However, the changing legislation for SMSFs can be complex. Obtaining financial advice can help you understand what is required.

It is also important to note that an SMSF may involve a lot more administrative work for you and the compliance requirements can be onerous. You also need to ensure that the costs of running your SMSF do not outweigh the returns. General guidelines suggest SMSFs are more cost effective for those with $250,000 or more to invest.

There are many things to consider before setting up an SMSF including:

  • understanding how an SMSF differs from other super funds
  • the roles and responsibilities of the trustees
  • the establishment process for an SMSF
  • how the fund is structured and what investments are permitted

  Small APRA funds (SAF's)

Like an SMSF, a SAF gives you freedom of investment choice but, unlike an SMSF, you don't have to shoulder the burden of compliance – a professional trustee does that for you.

Our financial planner can explain these options to you in more detail and recommend a strategy that is appropriate for you.

A financial planner can help you identify appropriate strategies to get you on track for a super retirement.

  Additional Information:

Any advice provided by South West Credit detailed in this website is provided independently of Quadrant Local and our Licensee, Charter Financial Planning Limited. Neither Quadrant Local, nor Charter Financial Planning Limited take any responsibility for any actions or service they provide.
TQC Nominees Pty Ltd ABN 15 053 019 560 and The Trustee for Portland Planning Trust ABN 83 789 671 326 trading as Quadrant Local are authorised representatives of Charter Financial Planning Limited, Australian Financial Services Licensee and Australian Credit Licensee.