RSM Bird Cameron offers the below strategies to help ensure that individuals’ super funds continue to receive gains, even in the face of poor investment returns.
Salary sacrificing can significantly enhance superannuation savings for retirement. By creating an agreement between an individual and their employer, they can “sacrifice” a part of their salary directly into their super account. Because contributions are deducted from their “before-tax salary”, their taxable income is reduced while their retirement savings receive a boost. In some individual situations this may mean they will be taxed at a reduced marginal rate due to the decrease in taxable income.
The government will make a co-contribution of up to $1,000 to superannuation funds for each personal after-tax contribution made by a tax payer. However, to receive government co-contributions the individual must be under 71 years-old, earn an annual income of less than $61,920 and receive at least 10 per cent of income from employment – either as a self-employed or as an employee.
Super contributions and the self-employed
Individuals may be eligible to claim a full tax deduction on their superannuation contributions if they are self-employed, substantially self-employed or an unsupported person. However, they will be regarded as non-concessional contributions if they do not claim super contributions as a tax deduction. To qualify as a ‘substantially’ self-employed person, income from an employer who is required to make superannuation contributions must not exceed 10 per cent of total earnings. To be considered an unsupported person, individuals must not receive any super contributions from assessable income in that income year.
Generally a tax deduction for super relates to the person making the contributions on their own behalf. There is an exception when it comes to spouses. An individual can make a concessional contribution to a super fund and split those contributions with a spouse. If they make contributions for their spouse, they may also be eligible to claim a tax offset, depending on their spouse’s income. Although once their spouse turns 70, they can no longer make contributions on their behalf.
Spouse contributions can be made on behalf of a spouse if they are aged 65 years or younger, or if they are between 65-70 years and have worked at least 40 hours over 30 consecutive days in the financial year in which the contribution is made.
The information provided in this is general advice. The information has been prepared without taking account of personal objectives, financial situation or needs. Before acting on the information, individuals should consider the appropriateness of the information, having regard to their personal objectives, financial situation and needs.
About RSM Bird Cameron
RSM Bird Cameron is the largest mid-tier accounting firm in Australia with national ownership and profit sharing and offers a full range of specialist advisory services, including business consulting and advisory, assurance and advisory, taxation consulting, corporate consulting and turnaround and insolvency. RSM Bird Cameron is a core member firm of RSM International, the sixth largest network of independent accounting and consulting firms in the world.