The 'S' word is buzzing around Australian homes, workplaces and an occasional BBQ - Superannuation. Last year's Federal budget promised some great results for near retirees and retirees and the federal parliament has delivered on these promises by passing the necessary legislation with the details ready to be implemented as of July 1.
Some pundits suggest there may even be further benefits in the budget this week. Watch this space for more details!
However, Bina Brown in the The Australian today put a dampener on the party questioning whether the current superannuation savings by Australians is enough to sustain us in retirement. (Warning: we're not saving enough for super)
Many agree that the 9% contributions made by employers will not be enough with employers, employees and government needing to make further contributions.
The government has started down this track by implementing the government co-contribution. Some employers are also coming to the party by make extra contributions based on extra contributions by employees while some employees are making the most of salary sacrifice arrangements to make tax effective contributions. According to the article the majority of employees are not making these further contributions.
The big deterrent of course is that these funds are not available until we are 55 or older and there are a multitude of other purposes like education, family and a home to name a few. The new laws also provide some powerful methods of accruing superannuation funds in the final years of work.
However if you can rearrange your personal budget to squeeze out extra contributions from your income take a look at the following simple steps.
1. Do you (or your spouse / partner) receive less than $58,000 in income? If so you are most likely eligible for a government co-contribution.
2. Does your employer (or your spouse's / partner's employer) offer to make extra contributions into super if you make extra payments? If so or you are not sure, check out the arrangements from your payroll department.
3. Can you (or your spouse / partner) afford to salary sacrifice some of your income to super? If you can, these contributions are taken out of your income before income tax and taxed at the normal super contribution rate of 15%. So it is of benefit to anyone who's marginal tax rate is 30% or higher.
Give us a call if you need more information.