Superannuation is undergoing changes once again this year, promising better prospects for most employees as compulsory employer contributions increase from 11% to 11.5% commencing 1 July 2024. Now is time to contemplate how to manage your superannuation effectively before these changes take effect.
Superannuation offers advantageous tax benefits on contributions and income during the accumulation phase. Moreover, many retirees aged 60 and above enjoy tax-free super income, capital gains, and withdrawals. Here are seven strategies to help bolster your nest egg:
TAX DEDUCTIBLE CONTRIBUTIONS
Traditionally, salary sacrifice has been a popular method to boost super while enjoying tax benefits. Contributions are taxed as little as 15% instead of an individual’s marginal tax rate, which can reach as high as 45% plus Medicare of 2%. For the current financial year, the concessional contribution cap is $27,500 per person with this increasing to $30,000 from 1 July 2024.
CATCH-UP CONTRIBUTIONS
Individuals with super balances below $500,000 at the beginning of a financial year can make concessional contributions for up to five preceding years of unused caps. This serves as an effective tax planning tool, especially for those experiencing significant capital gain events, such as the selling of an investment.
CO- CONTRIBUTIONS
The government provides up to $500 annually to the accounts of lower-income earners who contribute $1,000 from after-tax income to super. This offers an impressive 50 per cent return on investment for those earning below $43,445.
SPOUSE CONTRIBUTIONS
Making an after-tax (non-concessional contribution) to the super of a low-income spouse not only strengthens their balance but also provides tax benefits for the contributing spouse. A tax offset of up to $540 is available for those with spouses earning below $40,000.
SUPER SPLITTING
As couples approach retirement, maintaining similar super balances can prove advantageous for managing retirement income. Individuals are permitted to transfer up to 85 per cent of their pre-tax super contributions from the previous financial year to their spouse, subject to their fund’s regulations.
DOWNSIZING?
Individuals aged over 55 who downsize their homes can each contribute an additional $300,000 from the sale proceeds into their super, without affecting other super caps. Please note that conditions do apply to this strategy and you should consult an advisor before you sell the property.
These strategies offer pathways to optimize superannuation benefits and secure a more financially robust retirement. If you would like to discuss your eligibility to take advantage of any of these strategies please contact the team at Curve Accountants.
