This article will help to ease some fears about market volatility and outline a behavioural approach to address emotional decision-making. Hopefully, this information will assuage fears that many investors have experienced over the past several months.
By Andrew Sherlock, Head of Advice, Sherlock Wealth
If you are wanting to maximise your superannuation contributions, it is important to get this done before the end of the financial year.
What are the best ways to boost your retirement savings?
- Contribute a portion of your before-tax income to your super account. When you make a voluntary personal contribution, you may even be able to claim it as a tax deduction.
- Make a carry-forward contribution. This can be done if you have any unused concessional contribution amounts from previous financial years and your super balance is less than $500,000. This is a great way to offset your income if you have higher-than-usual earnings in the year.
- Arrange tax-effective contributions through salary sacrifice. The Australian Taxation Office requires these arrangements to be documented prior to commencement, so if this is something you are interested in, ensure you take the time to discuss it with your employer.
- Make non-concessional super contributions. If you have spare cash, have received an inheritance or have additional personal savings but have reached your concessional contributions limit, voluntary non-concessional contributions can be a good solution.
- Downsizer contributions are another option if you’re aged 55 and over and plan to sell your home. You can contribute up to $300,000($600,000 for a couple) from your sale proceeds.
- You can also make a contribution into your low-income spouse’s super account, which could provide you with a tax offset.
What are non-concessional super contributions?
Non-concessional super contributions are payments to your super from your savings or from income you have already paid tax on. These are not taxed when they are received by your super fund. Although you cannot claim a tax deduction for non-concessional contributions, they can be a great way to get money into the lower taxed super system.
How does this reduce my tax bill?
Making extra contributions before the end of the financial year can give your retirement savings a healthy boost, but it also has potential to reduce your tax bill.
- Concessional contributions are taxed at only 15 percent, which for most people is lower than their marginal tax rate. In this case, you benefit by paying less tax compared to receiving the money as normal income.
- If you earn more than $250,000, you may be required to pay additional tax under the Division 293 tax rules.
- Some voluntary personal contributions may also provide a tax deduction, while the investment returns you earn on your super are only taxed at 15 percent.
Watch your annual contribution limit
It’s important to check where you stand with your annual contribution caps. These are the limits on how much you can add to your super account each year. If you exceed them, you will pay extra tax.
- For concessional contributions, the current annual cap is $27,500 and this applies to everyone.
- When it comes to non-concessional contributions, for most people under the age of 75 the annual limit is $110,000. Your personal cap may be different, particularly if you already have a large amount in super, so it’s a good idea to talk to your adviser before contributing.
- There may be an opportunity to bring forward up to three years of your non-concessional caps so you can contribute up to $330,000 before the EOFY.
As always, we’re here to help. If you have any questions or would like to discuss EOFY super strategies or your eligibility to make contributions, please don’t hesitate to reach out to us here.
Andrew Sherlock is the Owner & Head of Advice at Sherlock Wealth.
A Sydney-based financial planning firm, Sherlock Wealth has been helping successful families, business owners and individuals with their wealth creation and wealth protection needs for more than two generations.
A Chartered Accountant with a background in funds management, Andrew’s career spans more than 30 years. Andrew was one of the first people in Australia to obtain the Self-Managed Superannuation Specialist accreditation and is one of only a few advisers in Australia to be a Certified Investment Management Analyst. He is a lifetime member of the international MDRT Top of the Table and holds a BA Economics degree from Macquarie University with majors in accounting and finance.
Helping clients achieve their lifestyle goals through smart investing and asset management, wealth structures, and strategic planning are the cornerstones of what Andrew and the team at Sherlock Wealth provide.
Andrew can also be contacted at firstname.lastname@example.org.
If you’re close to retirement, chances are you’ve already spent time thinking about how to tap into your superannuation when you retire.