By Tina Zawila
There’s been a lot of attention on superannuation over the last week or two after the Government announced a proposal to remove access to the low tax rate of 15% on earnings for people with over $3million in superannuation. Most of us probably switched off and dismissed the topic on the basis that most of us don’t have $3million in our fund now, and probably won’t achieve that result within our lifetime and therefore won’t be affected by this change.
In this article I want to discuss the superannuation topics that are of interest to all of us, regardless of the amount of our current superannuation savings.
If you are an employee, your employer (since 1 July 2022) will be contributing 10.5% of your ordinary time earnings to a superannuation fund of your choice. Further increases of 0.5% per annum are scheduled until 2025 when the rate reaches 12%. This is a significant portion of your earnings, and I encourage you to take an active interest in where and how your superannuation is invested. This is your money, and for many young people this can be their largest “savings account”, so it’s worthwhile looking for the best return on that investment. It’s also worth noting that the $450 earnings threshold (where superannuation was not payable if you earnt less than $450 per month) was abolished on 1 July 2022. So even if you are only working on a casual or part-time basis, you may now be entitled to superannuation contributions.
If you are self-employed, do not ignore your own superannuation contributions. You may not meet the definition of an employee, and may not be obliged to make superannuation guarantee contributions for yourself (depending on your structure), but you should still respect your own superannuation savings and at least meet the same minimum contribution as you do for your other employees, or as if you were working for an external employer. Your superannuation contributions are tax deductible and, in my opinion, superannuation for a self-employed person is the best tax deduction you can claim as it is money you are paying to your (future) self!
There are other incentives to supersize your superannuation savings, such as claiming a tax deduction for additional superannuation contributions you make in a financial year based on unused concessional contributions carried forward from past year/s. You may be eligible to receive a government co-contribution to your superannuation savings, if you earn less than $42,016 (the lower limit for the 2022/23 financial year), then for every dollar you contribute to superannuation (from after-tax earnings) the Government will add 50 cents, up to a maximum of $500. If you have reached the eligible age (60 or over now, but this reduces to 55 after 1 July 2023), you may be able to contribute up to $300,000 from the proceeds of the sale (or part sale) of your home into your superannuation fund (referred to as downsizer contributions).
These are just some of the ways to boost your superannuation. As you can see from the brief discussion above, it is a complex area of taxation and investing, and it affects all working Australians. We strongly recommend that you seek professional advice from a qualified financial planner based on your individual circumstances and that you do not act on the general advice contained in this article.
The team at UHY Haines Norton is here to help, call us today on 07 4972 1300.