Superannuation and Retirement Planning

Superannuation, despite what many may believe, is NOT an investment.

Superannuation is a tax environment provided by the government with the purpose of assisting individuals to build their wealth and fund their own retirement. The idea being to reduce pressure on the social security system when individuals exit the workforce.

Any Australian who is working and earning an income of at least $450 a month will have a superannuation fund, but it can be difficult to understand what it is and how it can assist you in the future; which is where our advisers come in to help.

Superannuation can be a very valuable tool in assisting you build your wealth. It is important to understand what types of investment options you have available to you within your superannuation fund.  Most people have access to managed funds whilst others may have more options including shares, and property.

SGC Contributions

Are compulsory for the majority of employers to pay into superannuation.

SGC rate 9.5%

Tax Effective

One of the main advantages of superannuation is the low standard tax rate.

Standard tax rate 15.0%

Boosting Superannuation

Additional contributions can be made to superannuation from pre or post-tax dollars.

Contributions caps apply

One of the biggest advantages of the superannuation environment is the tax incentives it provides.  For most individuals, any returns generated within super, generate a maximum tax liability of 15.0% (an additional 15.0% tax may apply for individuals earning over $250,000). This may provide you with the ability to further generate wealth simply due to the fact that you may have less tax to pay on your returns over time.

Whilst the tax advantageous environment is in favour of the superannuation system, it also has its limitations.  The largest limitation is access to the invested funds. An individual is unable to touch the funds within their superannuation fund unless they meet certain criteria. This criteria is broadly labelled as a ‘condition of release’.  Some examples where an individual may access their superannuation fund are as follows:

  • Reached their preservation age and retires
  • Reached their preservation age and begins a transition-to-retirement income stream
  • Cease employment after the age of 60
  • Reached age 65
  • Death
  • Permanent incapacity
  • Severe financial hardship
  • Terminal medical condition

Contributing to Superannuation

When it comes to increasing the funds in your superannuation account, there are many ways in which you are able to contribute. Broadly speaking, however, these can be broken down into concessional (before tax), and non-concessional (after tax) superannuation contributions.

Concessional (pre-tax) contributions

Concessional contributions cap for the 2017/18 financial year

$25,000

Non-concessional (post-tax) contributions

Non-concessional contributions cap for the 2017/18 financial year

$100,000

Both of these types of contributions are subject to a limit to which may be added to on an annual basis.

Other types of superannuation contributions that may be attributed to the above limits include; member contributions, salary sacrifice, spouse contributions, employer contributions, in-specie contributions and the government co-contributions.

Depending on your circumstances will determine whether or not one or many of the above contributions will be appropriate for you.

Further to the types of contributions available in the market, another factor to consider is your eligibility to contribute.  Depending upon your age will determine whether or not a type of superannuation contribution is available to you.

Below is a short summary of the various limitations you may have when contributing to superannuation.

What contributions can you receive?

Concessional Contributions Non-Concessional Contributions
Employer Salary Sacrifice Self-Employed/ Member Personal Spouse
 Aged below 65
Aged 65-69 and worked for at least 40 hours in a period of no more than 30 consecutive days in that financial year
Aged 70-74 and worked at least 40 hours in a period of no more than 30 consecutive days in that financial year
Aged 75 or over

M&A Wealth has a sound understanding of the superannuation environment and the potential opportunities that it may provide.  Should the potential to consolidate and maximize your superannuation be of interest to you, please contact one of our team in order to arrange a consultation.