Get the most from End of Financial Year Super Incentives

With the talk of working longer and the emphasis on taking care of your own retirement, here are some super incentives you may be able to take advantage of.

Consider these before the end of financial year.

Salary sacrifice

Salary sacrifice is not for everyone but it can be an effective strategy to reduce tax where your marginal tax rate is higher than the superannuation contribution tax. For example if you earn $50,000 per year, your marginal tax rate is 32.5 per cent, however the contribution tax you pay on sacrificing a proportion of your pay into super is only 15 per cent, saving you 17.5 per cent tax. If you are due a bonus at the end of financial year, you may be able to sacrifice this into super but be mindful of your contribution caps.

Concessional (pre-tax) contributions

Total concessional contributions generally include those that you can claim a personal tax deduction for or are employer contributions, including those that you salary sacrifice. During the year, you should not exceed the concessional contribution cap of $25,000 for individuals under 59 years of age on June 30, 2013 or $35,000 for all other individuals, otherwise these contributions will effectively be taxed as though you should have received them as normal wages. To claim a tax deduction personally, the amount you earn as an employee must be less than 10 per cent of your combined assessable income, reportable fringe benefits and reportable superannuation contributions. You must also ensure that the contributions are made by June 30 and you notify the trustee of your super fund that you intend to claim a tax deduction for these.

Non-concessional (after-tax) contributions

These are the contributions that you personally put into super in after tax dollars and are not subject to contribution tax. For example, if you had $20,000 in your personal bank account and contributed this into super, there would be no tax on these contributions. The non-concessional contribution cap is $150,000 per year or you can make 3 years’ worth of contributions at once, called the bring-forward rule. This rule means that you can contribute a total of $450,000 over a three-year period. Be careful utilising this rule as the non-concessional cap will increase to $180,000 from July 1, 2014 or $540,000 over a three- year period. Triggering the bring-forward rule before June 30, 2014 means that you won’t be able to utilise the larger limit of $540,000.

Super rebate

You may be able to claim an 18 per cent tax offset on super contributions of up to $3000 you make on behalf of your non-working or low-income-earning spouse. A rebate of up to $540 is available to an individual who makes superannuation contributions on behalf of their spouse where their spouse’s income is less than $10,800 per annum. This rebate reduces to nil once your spouse income exceeds $13,800 per year.

Super government co-contribution

This year, the maximum co-contribution you can receive from the government is $500 where your total income is less than $33,516. This co-contribution reduces to nil when your income reaches $48,516 per annum. To be eligible, 10 per cent or more of your total income must come from eligible employment-related activities or carrying on a business, or a combination of both. Note that you must be less than 71-years-old at the end of the financial year to be eligible for this incentive.

If you are unsure of whether these incentives apply to you, talk to your financial advisor about your own personal circumstances to ensure you meet the eligibility requirements. Each of these incentives are subject to eligibility requirements around income, age and residency so don’t miss out on something that could make a real difference to your retirement. A little bit will add up to a lot in the long run, so take advantage of these small incentives to help make a big difference to your lifestyle in retirement.

Olivia Maragna is the co-founder of Aspire Retire Financial Services and is a respected and independent financial expert. Olivia’s advice is general in nature and readers should seek their own professional advice before making any financial decisions.