Planning Process / Superannuation
Superannuation
Superannuation is a form of long term saving and investing to provide you with a pension or lump sum of money when you retire. Your superannuation builds up over the years that your employer contributes to your superannuation fund. Usually the rules of your fund allow you to contribute too, although some people put their own contributions into a separate fund.
Totally Integrated Financial Planning is able to develop suitable strategies for the Individual employee, Employers, Self employed persons and Self Managed Superannuation Funds (SMSF).
The Commonwealth Government now requires that all employers provide compulsory superannuation benefits for employees.
Your employer must pay a contribution on your behalf to a superannuation fund. The superannuation fund must operate according to Australian superannuation laws. If you are employed, you have been entitled to superannuation since at least 1 July 1992. The amount your employer must contribute is currently 9% of the value of your wages or salary, excluding overtime. These contributions are called the Superannuation Guarantee contributions.
If you are self-employed you may choose your own superannuation fund. You will not receive any employer contributions but you will receive tax concessions.
Your benefit also grows because the fund gets tax concessions provided it meets Government standards. The combination of saving and investment earnings could make your superannuation account worth a lot of money when you retire, perhaps even more than the value of a home.
Having your employer make superannuation contributions helps your savings. If you can salary sacrifice or make after tax contributions there are further advantages.
The government co-contribution commenced on 1 July 2003 with the government matching for personal superannuation contributions to 150% (maximum amount of $1,500) for eligible people.
Who is eligible for the co-contribution?
have made a personal superannuation contribution; and
an individual who has earned at least 10% of their assessable income and reportable fringe benefits from employment;
have assessable income plus reportable fringe benefits in the income year less than the upper income threshold (ie.$58,000 for 2004/05); and
not be the holder of an eligible temporary resident visa; and
be less than 71 years old at the end of the income year; and
lodge a tax return.
This means that the co-contribution will not be available for contributions made by substantially self employed, self-employed, unemployed or retired persons.
What is the co-contribution?
The co-contribution is a scheme where the Government makes additional contributions for low income earners who make personal contributions into their super. The maximum co-contribution of $1,500 is available for those earning $28,000 or less. For every dollar of a person's assessable income and reportable fringe benefits over $28,000 the maximum co-contribution is reduced by 5 cents, it phases out completely at the upper income threshold of $58,000.
The minimum co-contribution is $20 (even if the personal contribution is less than $20). It will apply to personal contributions made on or after 1 July 2003.
How will the co-contribution be paid?
Generally
> The co-contribution will be paid once the person has submitted their tax return.
> It will be paid directly into a complying superannuation fund or RSA.
> The co-contribution is treated as an undeducted contribution.
> The co-contribution is a preserved benefit and the normal preservation rules apply.
> Earnings on the co-contribution form part of the pre/post 1983 components.
The Government co-contribution will become an undeducted component when deposited into the member's super fund and will be subject to normal preservation rules.
For an indication of the increase in your superannuation please use our co-contribution calculator under useful tools.
All superannuation contributions made from 1 July 1999 must, with a few strict exceptions, be preserved in the superannuation system until you permanently retire from the workforce and reach the minimum age set by law.
It is important to seek professional advise in regard to superannuation matters as there are many significant issues that impact on the growth and earnings of your superannuation contributions, together with the appropriate taxation treatment when retiring, therefore having the potential to impact on your retirement objectives and goals.
