Contributions to superannuation
Quite a common misconception I come across with clients is that they don’t need to worry about making additional contributions to super until later in their working lives, if you want to take control of your retirement then it is never to early to be thinking about making that extra contribution.
Kelly is 25 years old and working full time and earning $65,000 per annum, her superannuation balance is $20,000. If she continues just to receive her compulsory employers’ contributions paid into her superannuation, at retirement she will have a super balance of $483,000.
If Kelly starts salary sacrificing $5,000 per annum into super this will increase her super balance at retirement to $777,000 which is a massive increase of $294,000.
By making a $5,000 contribution to super, this will also serve as a tax deduction for Kelly by reducing her income tax payable by $1,800.
As of the 1st of July 2021, there were the following changes to superannuation:
- Employers must now contribute 10% of their employee’s salary to superannuation (as long as the employee is eligible to receive employer contributions)
- The before-tax (concessional) contributions cap has increased to $27,500 per year (this includes employer contributions)
- The after-tax (non-concessional) contributions cap has increased to $110,000 per year (or $330,000 over 3 years if certain conditions are met
To make an additional payment to super and be eligible to claim a tax deduction on the contribution, there is a couple of different ways this can be done, have your employer make the additional payments on your behalf by paying an additional amount from your wage every pay period. Alternatively, you can make a payment directly from your bank account and lodge a form to your super fund to claim a tax deduction.
If you would like to discuss how contributing to super will benefit you directly, please contact our office and book an appointment with one of our Financial Planners.
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