Rising Tide Blog

Superannuation – where to begin! (Part 1)

Posted by Matt Hale

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Superannuation – where to begin!

“I want to pay less tax”.

“I want to invest for the future”.

When people first walk through our doors, we like to understand their goals and ask them a few questions about what money means to them or what their dreams are. On reflection, without doubt, the above two statements are what most people answer when we ask why they have come to see us.

Now, as we know, it takes time to articulate the deep and meaningful stuff when it comes to money, but there are also some great and simple strategies to help people on their journey. One of these is to use superannuation

We know that everyone’s circumstances are unique, but when used correctly in a financial plan, super can help reduce tax and build for the future.

In Part 2, we get into the nitty gritty of salary sacrifice, but before that, I want to help you understand the pillars of superannuation and there are some tricky things to take into consideration.

Firstly, what are the type of contributions?

  • Before tax contributions – this is what your employer puts in and also any salary sacrifice (which we will cover off in more detail next week)
    • This is taxed at 15% (which is a lower tax rate than if you earn anything above $18,001 in this financial year)
  • After tax contributions – like if you sell a house or receive an inheritance. This can also potentially help you get some free money from the government (if you earn less than $53,564 in 2019/10.

How much can I put into my super each year?

  • Before tax contributions – Up to $25,000 in 2019/20 (Including your employer contributions)
  • After tax contributions – $100,000 per annum (up to $300,000 in rare circumstances).

When can I access my super?

  • Somewhere between ages of 55 and 60 (depending on when you were born).

What are the tax benefits?

  • As mentioned above, when your employer contributes to your super, the tax is lower than most people’s marginal tax rate
  • The tax on your super’s growth rate is lower than any money invested outside of super
  • When you retire and want to starting accessing your super, the withdrawals are tax free if you are 60 years or older.

What happens if I die before I spend all my super?

  • You can nominate who receives your super after you die. But please remember there are different options and tax consequences of this, so check with us before making any decisions.Finally, here’s a short checklist to get your super sorted
  • Find out what super funds you have – if you aren’t sure where to start – setup your mygov account and link the ATO service
  • Look at how your money is invested. The amount of growth assets including Australian and international shares will determine your long-term returns, how volatile your account is, and what fees your pay
  • Make sure you remember to update your beneficiaries – Superannuation-death-benefits.pdf
  • Understand what insurance is included with your super account (if any) – and make a conscious decision whether it’s right for you (make sure you don’t just cancel it).

When used correctly, superannuation can be an amazing way to build wealth, but it does take some effort to understand it. Make sure you dedicate some time to get your head around it and you will reap the rewards.

Income tax rates
Government co-contribution