Everybody wants to retire comfortably. Unfortunately, there is a wide gulf between our goals and what we actually end up achieving. According to a study released last year by the Melbourne Institute, among those aged 40-64, 45.6 per cent of couples and 77.2 per cent of singles are predicted to run out of retirement savings before they reach their life expectancy.
It doesn’t have to be that way, however. If you’re aiming to live out a comfortable retirement in Bowen, Cannonvale, Proserpine or Collinsville or anywhere else, there is an array of strategies you can undertake to add extra to your superannuation savings. Here are a few of the most notable.
1. After-tax contributions
Also known as non-concessional contributions, these are contributions made from an individual’s after-tax income. This means they’re not taxed when they’re added to your superannuation savings, because they’ve already been taxed once.
These contributions can either be made by you, the fund holder, or by your spouse on your behalf. Just be aware there is a limit of $150,000 on these contributions – anything more will be taxed at 46.5 per cent.
2. Salary sacrificing
Salary sacrificing is another popular way to add a little more to your superannuation. Under this arrangement, rather than making contributions after you’ve received your pay cheque, a portion of your salary will automatically be deducted and put into your super fund. You must arrange this set-up with your employer through a formal agreement.
Just as with after-tax contributions, there is a limit to how much of your salary you can sacrifice. The majority of people can contribute up to $30,000, but if you’re aged 50 or over, this limit rises to $35,000. These contributions also get taxed at a rate of 15 per cent, which can benefit higher earners whose personal marginal rate of tax may be as high as 49 per cent.
3. Super for the self-employed
This isn’t the only way to take advantage of this special tax rate. You can make similar tax savings on your superannuation if you happen to be self-employed. Most business owners can claim a full tax deduction on the money they put into their super. But again, this is up to a limit – the same cap as for salary sacrificing.
Make sure, however, that your super fund has your unique, nine-digit tax file number. If not, your super contributions will taxed another 31.5 per cent, and you won’t be able to make personal contributions.