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Superannuation Question:

Discussion in 'The Pub' started by termis, Jun 24, 2012.

  1. For those of you who are good at personal finances... :-s

    I have sum extra cash floating around, and was thinking about putting into super payments for this FY.

    Now, I'm a typical salary-earner - all my income came from an employer (no income from self-employment).

    Now, from what I'm reading, I CAN'T make any lump-sum concessional super payments for this year (Under "Maximum earnings as an employee" condition in the ATO link below).


    For a wage-earner like me, is the only real option going for salary sacrifice? That is, I can't make $5-$10k payment right now to reduce my taxable income for this FY?

    I can go the non-concessional route, but I'm not sure if that's worth it...
  2. I wouldn't bother, stick it in a term-deposit account instead.
  3. New bike??
  4. unless you have an exceptional super fund, no it isn't worth it. Most funds have gone backwards the last 2 years so tragically some members would have been better off putting their money under their mattress!

    If you have a non-working or low income partner, you should look at the co-contributions option. I believe this fin year is the last one where the govt will match dollar for dollar co-conts up to about $1,000, so in other words drop $1K into your missus' super and the govt will chip in another $1K ... best return around.

    Other than that, I can't see a way of you turning that lump sum into a tax deduction and still keeping the money for your future. I've even looked into registering yourself as a charity ... it won't work :'-(
  5. Mattress? Mine would of been better sitting on the dash of my car with the window open. If I had a choice, I wouldn't do super at all. Invest it in beer.

    I figure if I keep the bottles, I could recycle them in SA and get more back than my super fund could ever dream of doing.
  6. I don't know anything at all about all this super stuff.
    Are employers legally obligated to contribute to a super fund specifically? Or is there some other thing that me and an employer could negotiate, such as some sort of credit union or bonds? Colonial first state?? I really am clueless lol
  7. [answer]It has to go to super. You can pick what the super fund is. If you have enough money you can set up your own super but then there are lots of rules about what you can invest in. [/answer]

    [rant] My expectation is that the government will force us all to buy bonds as they are "more secure". A bond is another name for a loan to the government. There is already talk of infrastructure bonds to get superannuation money to pay for things that previously taxes would have paid for (roads and stuff) whilst tax money gets wasted on subsidies to GM and more money for all the insiders with their snouts in the gravy train. [/rant]
  8. ... :-s
  9. As a certified cynic,

    You put your money into a fund that doesnt earn much if anything, that you cant touch for a few decades, and you pay someone else to make investments that you have no control over, in the hope that the government of the day doesnt keep postponing when you get access to it, while all the time eyeing off the biggest pile of cash in the country, and working out how they can get their hands on it while holding it out in front of you like a carrot so you keep adding money into it.


    You take control of your money and build a long term investment vehicle that allows you to have a more flexible arrangement in terms of access and leverage.

    Work out where you need to be, and what you can do about it, and see a good accountant. Worth a few hundred dollars to find out what is possible and what is not possible.
  10. The government can't get its hands on it. Most of that money is already tied up in the ASX providing liquid capital to the businesses that keep the economy running; most of what is left over sits in low yield (eg safe) managed funds with the banks that will pay your super 3% interest and then lend the money back to you at 7% for your mortgage. So the government can't get their grubby little hands on it without pulling a trillion odd dollars out of shares and bank equity, effectively triggering a credit crunch.

    If you can make a concessional contribution or a spouse co-contribution it is good value; concessional contributions drop your tax rate on those dollars from whatever your marginal tax rate is down to a flat 15%, so that can save you up to 30 cents in the dollar in tax, depending on your tax rate. Co-conts are I believe deductible (but please check that, I'm running off memory here) and as mentioned will attract a government contribution up to about $1,000 which is money for nothing.

    The funds are going through a real shake-up at the moment coz of the new legislation that states that your financial adviser at your super fund must actually earn any commission he is paid (shocking I know). So we should all be shopping around for the best super fund for our personal situations since the advisers at those funds are going to have to start working a lot harder to earn their money.
  11. Although Super funds have suffered badly over the last 18 months in particular, it can be the best time to "buy in" at the bottom end.

    Making a salary sacrificed co-contribution helps YOUR tax for this financial year, your spouse could get the government $$ as well.

    Having said all of the above, your personal situation comes into play as well. Once in Super you can't touch it until you at least qualify for transition to retirement or in extreme cases of hardship. So your age, mortgage and other committments etc need to be considered.

    Also don't forget you can stipulate how you superannuation contributions are invested. Most funds allow you to change the % that goes into cash, bonds, australian shares, overseas shares etc at least once and some several times a year. This can be useful once again depending on your age.

    Most super funds also allow a free consult with a registered financial planner, others may charge a small fee.
  12. @OP

    In simple terms:

    If your employer offers you the chance to salary sacrifice your super - DO IT
    It will decrease you taxable income +1
    It will remove the tax payable on deposit for this component of super +2
    You will pay less PAYE tax in the long run +3

    Easy as that
  13. Yeah, I get all that. But original question stands:

    Can I make a lump-sum concessional contribution on my own (i.e. BPAY into the fund) at this point in the FY to lower my taxable income for this FY? From what I'm reading, no... but wanted to verify if anyone's in the know here.

    Either way, not a massive deal, I can just make bigger salary-sacrifice payments starting next FY, and pay less tax next year... (I'd just miss out on a healthier tax return that I thought I might've been able to get this FY...)
  14. IN your post you mention you have "extra cash", then that is not a salary sacrifice. This is using after tax savings which you can choose to contribute to your superannuation or to reduce a mortgage. This is undeducted contributions, or could be a co-contribution - see below

    In salary sacrifice, an employee may choose to take money off his salary before paying taxes and receive a lesser amount during payday. This option can be provided by employers to their workers, but they are not obligated to do so. Tax concessions applied in salary sacrifice, enable employees to pay only 15% of tax instead of 30% or more. However, this benefit is limited to those who are exempted from superannuation contribution surcharge.

    Government co-contributions are offered to people who have very low income, often lower than $20,000. The amount that the government may co-contribute is based on a person's income, contribution, and yearly income tax return. The Federal Government is giving away money to anyone who makes a non-concessional (after-tax) contribution to their super fund, and who earns less than $62,000 a year. The tax-free giveaway is officially called the co-contribution scheme.

    You receive a tax-free super contribution from the Federal Government when you make a non-concessional (after-tax) contribution. If you earn $31,920 or less (for the 2011/2012 year), the Federal Government pays $1.00 for every dollar you contribute to your super fund in after-tax dollars, up to a maximum of $1,000 a year.

    For example, if you make a $1000 non-concessional contribution, your super fund account receives a $1,000 tax-free contribution from the Government. If you make a $600 contribution, the Government pays $600 into your super fund.

    If you earn more than $31,920, your co-contribution entitlement reduces by 3.33¢ for every dollar you earn over $31,920, until it cuts out at $61,920 (for the 2011/2012 year). For example, if you earn $40,000 and you make an after-tax contribution of $1,000, the Government’s maximum contribution of $1,000 is reduced by $269, which potentially gives you a co-contribution of $731. If you earn $40,000 in total income, then even when you make a non-concessional contribution of $731 (rather than $1,000) you’ll still receive a co-contribution of $731. Hence it reduces even further the more you earn.

    The co-contribution payment process: in 3 steps
    1.Assuming you earn less than $61,920 for the 2011/2012 year, you then make a non-concessional (after-tax) contribution to your super fund.
    2.You lodge your 2011/2012 tax return.
    3.Within 60 days, the Government pays the co-contribution into your super fund.

    Your super fund can tell you how to make personal super contributions. Most funds offer different options for making super contributions, including BPAY, direct debit or through your bank account.

    Have you rang your fund and asked how to make a payment??? Might be a better option than expecting to get the correct answer from a forum where you have do idea of the qualifications of the person giving the advice.
  15. Good stuff. Thanks for the thorough explanation.

    I'll give them a shout tomorrow...
  16. buy gold and bury it - instant super fund
  17. silver instead.
  18. There's a $150k limit per year and you can dump $450k [3 year rule]
    About accessing your super? whilst working aged 55 n over, you can open a TTR account and this will give you access up to 10% of what you move from Super into Pension.
    Generally Industry funds are cheaper to run then the 'Colonials/BT's' but the one thing alot of people do is ti monitor and move the money around to help reduce the losses. At the moment my money's in Fixed Interests, they're pullin in over 10%!! Last year our balance fund did more then 10% markets move, so move with them. if you cant be fark'd this is where financial adviser charge, cause of their knowledge and market watching.
  19. Short answer - no. Most salary & wage earners can't make deductible lump sum contributions. Best you can with super (tax wise) this FY is get your last paycheque sal sacrificed in full. Co-contribution is worthwhile if you qualify. Can also make a contribution for your spouse and get a tax offset for this in some cases (unless that's been changed in the last couple of years).

    This can be complicated stuff though so keep in mind; Accountants advice > Internet forum advice.