Do you find the ins and outs of superannuation confusing? If so, check out these answers to frequently asked questions about super to get a handle on the basics.
How much money do you really need to retire?
The Association of Superannuation Funds of Australia (ASFA) states that in order to enjoy a ‘comfortable’ lifestyle in retirement, you should have savings of:
- $640,000 for a couple
- $545,000 if you are single
On the flip side, a single or a couple can fund a ‘modest’ lifestyle with savings of just $70,000 at retirement.
How is my super taxed?
Contributions are broadly categorised as either concessional or non-concessional.
Here’s the difference:
- Concessional superannuation contributions are contributions on which a tax deduction has been claimed by an employer or an individual. They are taxed at 15% within the super fund (with a tax offset available for low-income earner).
- Non-concessional superannuation contributions are made from after-tax income. These include many personal contributions and government co-contributions. Non-concessional contributions are not taxed within the fund.
Earnings from investments are taxed at 15% in the accumulation phase.
Once you are over age 60, earnings in the pension phase and any payouts from the super fund, are tax-free.
How can I contribute to my superannuation fund?
If you are employed, over 18, and earn more than $450 per month, your employer will contribute 9.5% of your ordinary time earnings to superannuation.
Other ways to boost your super fund include:
- Ask your employer to make concessional salary sacrifice contributions from your pre-tax income.
- Make personal contributions from your after-tax income. You may be able to claim a tax deduction for these contributions (subject to set limits), in which case they will become concessional. If no tax deduction is claimed they will be non-concessional.
- Contribute on behalf of a spouse who earns less than $37,000 a year, which then allows you to claim a tax offset of up to $540.
- Sell your home to qualify for a special ‘downsizing’ contribution (available to over 65s only).
- Make a personal non-concessional contribution and you may qualify for up to $500 as a government co-contribution (available to low to middle-income earners only).
Age limits and work tests may apply to some types of contribution.
When can I access my superannuation?
You can access your super when you:
- Turn 65, even if you’re still working.
- Reach preservation age (between 55 and 60 depending on date of birth) and have retired.
- Start a transition to retirement (TTR) income stream.
- Face severe financial hardship, specific medical conditions, or under the first home super saver scheme.
Who can I leave my superannuation to?
You can elect to have your superannuation paid to your legal personal representative if your super fund allows binding death benefit nominations. The money is then distributed as instructed by your Will.
As an alternative, you can instruct your fund trustees to pay your death benefit to one or more of your ‘dependents.’ Under superannuation law these are:
- Your spouse (includes same-sex and de facto partners)
- A financial dependent
- People you had an inter-dependency relationship with
If you don’t have a binding nomination, your super fund’s trustees will decide which dependants will receive the death benefit. They will be guided, but are not bound by, any non-binding nomination.
How do I make the most of my superannuation?
Superannuation remains, for most people, the best way to save for their retirement. But it can be complicated and there are numerous rules to navigate.
That creates challenges, but it also generates opportunities, many of which can add thousands of dollars per year to your retirement income.
If you are ready to unearth those opportunities and make the most of your super, now is the perfect time to talk to a Think Big advisor.
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs. Speak with a tax accounting specialist (such as TBFG) who is up-to-date with applicable deductions, tax law, and business structuring to get you the biggest return on your EOFY tax assessment.