Extra super contributions?

Just wondering what all your thoughts are on making extra superannuation contributions? I was thinking of a small amount like $10-20/week just to get the benefit of compounding over time. What are the implications of doing this before tax and after tax? I believe the provider my workplace uses for salary sacrifice charges $200/year which seems high for the amount I'm looking to contribute. Thanks

 

You can make direct contributions rather than through your employer( check with your accountant).

Personal super contributions

If you’re an employee you generally can’t claim a tax deduction for any personal super contributions made before 1 July 2017, although you may be eligible for a super co-contribution. From 1 July 2017, most people, regardless of their employment arrangement, will be able to claim a full deduction for personal super contributions they make to their super until they turn 75. Individuals who are aged between 65 and 75 will need to meet the work test to be eligible to claim the deduction. See below for further information.

 

I don’t understand why there would be any charge, if that’s the case maybe do as Turk suggested and make a contribution directly to your fund via bpay?

 

Thanks. Didn't realise it was tax deductible - that's even better!

 

Before tax is beneficial abd depends on your personal tax rate ( beneficial if 32.5% or higher), any nondeductible debt, cashflow situation, age (how close are you to preservation age etc..)

 

Can you claim if you salary sacrifice into super?

 

Usually only up to a limit of $25,000, income can effect the tax rate.

Check with accountant.

 

play the with calculator
AMP Salary Sacrifice Calculator

if you don't have use of the money up to retirement and would've stuck it in a low cost ETF/LIC for long term any way, then would be worth it
even better if your company is willing to match any additional contributions
the higher your taxable income, the more tax benefit you get out of this

 

Pros

• Tax advantage where current and income through to retirement warrants

Cons

• Legislation changes
• Unable to access money until retirement

Considerations

• When you want to retire: the closer to 65. the more you should consider Super. If you want to retire earlier you are going to need money to get you to 65.
• Current income: if you're paying over 15% in tax you can save by putting into Super.
• Future income: assuming money you don't put in Super is working for you, that equates to income, which will be added on top of your future income stream. The higher that income gets the more reason to put into Super
• Control: money in Super is inaccessible until you turn 65 or later if the government change the rules. A lot of unforeseen events could eventuate in which you wish you could have the super money back.
• Time to retirement: the closer you are to retiring the more likely you should be putting money in Super.

 

How close is close? 5-10 years/ 11-15 years/ 15-20 years?

Obviously, the longer it is in there, the more effect that compounding will have on the final outcome.

 

Also, from the point of view having made the mistake.....

My business contributed to my personal super fund, over the gov min requirement of 9% (at the time).
BE WARNED, this is considered to be income, same as wages

Even though I cant access it for many years !
(I earnt 75k, and paid an additional 7k into super, this took our "houshold income" over 100k, and i received a 5k bill We had estimated our houshold income with centerlink for part A/B family allowances and whatever else).
It was poor advice from our accountant

 

No.
You are already contributing via pre-tax salary, you can’t double dip.
Marg

 

I contribute $100 a fortnight extra to super via salary sacrifice.

Are there any disadvantages to also contributing the same amount to super post tax and claiming a deduction?

 

The one disavantage is you have to fill out a form to claim before the end of the year. Or better to increase your before tax to $200/fn, which might also involve filling out a form to send to your payroll dept

 

@Nodrog has written some good posts about this topic. In the last few years before retirement you may want to get as much into Super for the post-retirement tax concessions as much as the up front tax breaks. You've also got more control knowing the money will be available sooner rather than later.

Do the calculations - how much do you need/want in Super? 1.6M? Then work back from that and start adding so that the last input goes in the year before retirement.

Not advice

 

By the sounds of it, I'll need to work for another 40 years taking jato consideration the $25k/annum cap on contributions

 

You can also make non-concessional contributions

Contribution caps

also

On 9 May 2017 the Government announced that from 1 July 2018, individuals aged 65 or over will be able to make a contribution to super of up to $300,000 from the proceeds of selling their home.

Contributing the proceeds of downsizing to superannuation

Always check with a professional.

 

I occasionally read Bruce Brammal’s blog which from memory are his Eureka Report articles. I fully understand younger folk wanting to retire before they can access Super focusing on investing outside Super as their first priority.

This article from Brammall who follows Super trends / legislation / Treasury Reports etc closely does not make for optimism reading:

The super future is looking bleaker | Bruce Brammall Financial

 

Once you are forced to withdraw certain portion of your super based on your age. What do you do if you don't spend it all and there is some left over and next withdrawal date arrives? Can you just then invest in your own name? Maybe setup a company and invest through it and let franking credits compound?

Cheers,
Oracle.

 

Yes, you have to withdraw a certain percentage each year which increases the older you get. By the time you hit 95 it is 14% per year!

The good news is that once you have drawn down the funds you can do whatever you want with them. Set up.a company and trust structure to invest in LICs and ETFs if you want to. Of course you would seek legal and taxation advice to set it all up correctly.