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Understanding super

Published 9 October 2018

One life, one super account.

Most, if not all, of us will work for more than one employer over the course of our careers. And if you go with your employer’s default super fund whenever you change jobs, you’ll end up with several super accounts - and that means several sets of account fees, which will eat into your super balance.

It makes sense to choose a single super account that can stay with you throughout your working life.

When you have just one super account, you’ll be able to:

  • reduce your costs, with only one set of fees
  • manage your investments more easily
  • keep track of how much money you have.

More super, less tax: concessional contributions

Salary sacrifice is when you make additional ‘before-tax’ or concessional contributions to your super. If your employer pays in extra super for you (over and above the Super Guarantee amount that they are required to contribute), that money will be taken from your pre-tax pay.

If you’re earning less than $250,000, this money is taxed at a maximum of 15 per cent rather than your marginal tax rate, so it can be a tax-effective way to invest in your future. If your income exceeds $250,000, the tax rate on concessional contributions is 30 per cent.

You should be aware that there is a concessional contributions cap (for the 2017-18 financial year) of $25,000 for people of all ages. If you have more than one super account, the cap applies to the total contributions to all your accounts.

If you make concessional contributions above this amount, they’ll be taxed at your marginal rate and you’ll also be required to pay an excess concessional contributions charge.

Non-concessional contributions

You can also boost your super by making payments to it from your after-tax money. These are known as non-concessional contributions.

If you earn $36,813 or less (for the 2017-2018 financial year) and make a personal non-concessional contribution, you may be eligible for a government co-contribution payment of up to $500 into your super. This maximum co-contribution payment reduces when your income exceeds $36,813, becoming zero once your income reaches $51,813.

As is the case for concessional contributions, there are caps for how much you can pay into your super from your after-tax money, and it’s important to know that contributions made to all of your funds and accounts (if you have more than one) are added together and counted towards the contributions caps.

If your total super balance at 30 June 2017 is $1.6 million or more, the cap is nil, but otherwise it's $100,000.

There is also a ‘bring-forward’ arrangement which allows you, if you’re under 65 during the ‘triggering’ year, to make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year.

For the 2017-18 financial year, to access the non-concessional bring-forward arrangement you must:

  • be under 65 years of age for one day during 2017 (the triggering year); and
  • have had a total super balance of less than $1.5 million at 30 June 2017.

The cap amount for years two or three of a bring-forward arrangement is nil for a financial year if your total super balance is more than or equal to the general transfer cap at the end of 30 June of the previous financial year.

If you’re between 65 and 74, to make a contribution you must have been gainfully employed for at least 40 hours over 30 consecutive days in that financial year.

If you make excess non-concessional contributions and don’t withdraw them, you’ll pay 47 per cent tax on the amount. If you withdraw the excess contributions and any earnings, those earnings will be taxed at your marginal rate (as part of your assessable income) and you’ll be entitled to a 15 per cent tax offset for the tax paid by the super fund.

Talk to us about superannuation

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