For most Australians, superannuation represents a lifetime of saving and provides the promise of a bright and comfortable future. It makes good sense to do what you can to maximise your super by contributing as much as possible while you are still working.
Regular contributions are most effective for boosting your super balance, but it’s important to realise that this doesn’t need to compromise your current lifestyle. Instead, a well-considered super strategy can help you maximise your retirement income through optimising your contributions and reducing your tax.
Here are FIVE strategic steps for building your super:
STEP #1. Consider making concessional contributions Concessional contributions include employer Superannuation Guarantee (SG) contributions, salary sacrifice contributions and tax-deductible member contributions. Currently, concessional contributions can be made up to a total of $25,000 per year, from any source, for all eligible members. These contributions are taxed at 15% (30% if your income is above $250,000 pa). However, you will be able to claim a tax deduction at your marginal rates, making this a worthwhile strategy when you earn more than $37,000 pa.
STEP #2. Consider making non-concessional contributions Non-concessional contributions are made from your after-tax income or savings and can also increase your retirement savings dramatically. Caps apply here too and exceeding them incurs penalties. All contributions to super are preserved until you meet a condition of release. Your contributions need to take place over time as cap changes mean it is now more difficult to build your super by contributing large sums in the years just before you retire.
STEP #3. Consider contribution splitting Contribution splitting with your spouse may be used to even up your account balances. Now that each member is limited to $1.6m in their pension account, it is possible to transfer concessional contributions to/from your spouse to ensure your combined pension caps are fully utilised. This can be done each year provided certain conditions are met.
STEP #4. Consider transferring your business premises/commercial property to your SMSF
A commercial property, including your business premises, can be contributed to and/or purchased by your SMSF, provided it is used wholly and exclusively in a business. Income earned will be taxed at a maximum of 15%. If you have reached your contribution cap or your SMSF doesn’t contain sufficient cash to purchase the property, it may be possible to use a Limited Recourse Borrowing Arrangement (LRBA).
STEP #5. Consider making a ‘downsizer’ contribution If you are 65 or more and no longer working, you may wish to take advantage of new downsizer legislation. From 1 July 2018, if you sell your home you may be able to make a downsizer contribution of up to $300,000 (each). There is no need to actually downsize or be living in the property. Rules and regulations apply and you will need to find out if your circumstances satisfy the conditions for making this type of contribution.
Your next step…
Depending on your circumstances, there may be additional strategies you can use to help boost your retirement savings. It is most important to seek professional advice that is personalised to your particular needs. To discuss how we can help you develop a sound strategy for building your super, please contact your accountant at Rosenfeld Kant today: call (02) 9375 1200 or email gary@roskant.com.au, raul@roskant.com.au, elias@roskant.com.au
The information (including taxation) contained within this article is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Rosenfeld Kant strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.
