A Little Bit Now, Makes a BIG Difference Later
Do you want to contribute more to super? Well now you can! For the first time in five years, for people under 50, the caps that regulate the amount you can contribute to super (on a concessionally taxed basis) have increased. That is, if you are under 50 from 1 July 2014, you can contribute $30,000 a year to your super (up from $25,000). If you are 50 or over during 2014/15, you can contribute up to $35,000 a year (increased from $25,000).
So, if you’re worried that your super guarantee (SG) contributions alone may not afford you the lifestyle you want in retirement, then why not start contributing more to your super?
Depending on your age, you can contribute up to $10,000 more a year. Remember, your concessional contributions include both SG and salary sacrifice contributions and are taxed at the concessional rate of just 15 per cent compared to your marginal rate.
Note: If you earn more than $300,000 in taxable income, then the 30 per cent contribution tax rate may apply.
Year Concessional contributions Non-concessional contributions.
Case study – How Ann and Robert reap the benefits.
Let’s have a look at how the new contribution limits help Ann and Robert save for their retirement.
Over the last five years, Ann (aged 40) and Robert (aged 50) have both been maximising their concessional contributions limits and contributing $25,000 (via both SG and salary sacrifice strategies) into their respective super funds.
Under the new rules, Ann can now contribute an extra $5,000 to her super each year and Robert can contribute an extra $10,000 to his super each year. The following table shows the difference these additional contributions (non-indexed over 15 years) would make to their retirement nest egg.
As you can see, it’s a substantial amount – $92,400 for Ann and $184,804 for Robert.
There’s also another opportunity to contribute more to super. As the ‘non-concessional’ contribution cap is set at six times the standard concessional contribution cap, from 1 July 2014, this cap also increased up to $180,000 per year. Also, if you’re aged 64 or younger, you may be eligible to bring forward the next two years of non-concessional contributions in 2014/15 — increasing the cap to $540k.
Non concessional contributions are after-tax contributions and include personal contributions to super for which you have not claimed a tax deduction.
If you’re considering contributing more to super, now is the time to take action. If you want to talk about how this strategy might work for you, please speak to us today.
For further information, please feel free to either call for a complementary discussion with one of specialists on 1300 99 77 34, or email your inquiry to firstname.lastname@example.org
The advice provided on this article is general advice only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. If any products are detailed on this website, you should obtain a Product Disclosure Statement relating to the products and consider its contents before making any decisions.
Chan & Naylor Wealth Planning disclaim all and any guarantees, undertakings and warranties, expressed or implied, and shall not be liable for any loss or damage whatsoever (including human or computer error, negligent or otherwise, or incidental or consequential loss or damage) arising out of or in connection with any use or reliance on the information or advice in this article. The user must accept sole responsibility associated with the use of the material on this site, irrespective of the purpose for which such use or results are applied.