Three easy tips to get better bang for your buck from your super
August 16, 2019
August 16, 2019
Most of us are across the fact that superannuation is how most Aussies put money away for our twilight years, but many of us don’t think too much about the fact that we can also get some more immediate benefits from our super, particularly at tax time (given it’s that time of year).
So whether its claiming for voluntary investments you made into your super last financial year or making sure you get the most out of each tax paying dollar in 2020 and beyond, we’re sharing three of our fave top tips to make your super work for you today.
Tip 1 – Made a Personal Contribution to Super? You can claim it as a tax deduction.
Seriously. You can.
So, for example if you signed up and were using Longevity App to make automated super contributions prior to June 30th you would have made a personal contribution to super in the 2019 financial year. While you can make personal investments into your super in other ways too, not only are these top ups helping your future by building that nest egg for a happy retirement (go you!) but you can likely also claim it on your personal tax return as a deduction. There’s a few things to keep in mind, such that there is a limit on how much you can put into super as a pre-tax and/or concessional contribution (which is what they become if you claim personal contributions as a tax deduction). Currently the max is $25,000 a year and this includes the money your employer puts directly into your super account (aka the Super Guarantee). You also need to fill out a form and submit it to your super fund (they’ll sometimes send them out to you at tax time too).
What’s flippin’ sweet aside from the fact that who doesn’t love a tax deduction is that, if you claim these as concessional contributions (their fancy technical term) on your tax return you’ll only be charged 15% tax within your super fund, a whole lot less than the rate most Aussie’s are paying to the taxman*.
Take this as an example: The average Aussie earns about $85,000 per year. If they were to make $2,000 in concessional contributions to their superannuation in 2019 and claim it on their tax return they’d more than halve the tax paid on that income!
Tip 2 – First Homebuyer? You can user you super to put towards your house deposit.
I know – I don’t know why people aren’t talking about this more either! Saving for a first home is a mission, so we’ll take any help we can get around here. So did you know that you can put money into superannuation, earn money on your investment and then pull it back out to put towards your first home deposit? It’s a government initiative called the First Home Super Saver Scheme.
Essentially how it works is that if you’ve made contributions into your super fund since 1 July 2017 you can apply to have these funds released and their associated earnings to help you purchase your first home.
Side note on the FHSS detail:
- Non-concessional contributions can be withdrawn for first home deposit tax free.
- Concessional contributions and total earnings will be taxed at marginal tax rates with a tax offset of 30%.
- Superannuation Guarantee contributions (ones made by your employer) can’t be accessed under this scheme.
Sounds pretty cool, right? Now of course there are eligibility requirements that you need to meet – for example you need to live in the premises you are buying (or intend to do so ASAP). There’s also a maximum amount of $30,000 that you can pull out as part of the scheme and the earnings you make on the money in your super is also a bit different. But to be honest, this one really makes me wish I could’ve taken advantage of the scheme when I was trying to scramble together a deposit for my first home! It may not get you the whole deposit in one swoop, but every little bit helps!
Tip 3 – Low Income Earner? Earn an immediate return of 50%!
This one’s an oldy but it’s a dead set goody. Basically the government is willing to plop up to $500 into the super accounts of low- and middle-earners if they’ve made a personal after-tax contribution into the same account.
Now I’m sure many of you are asking so what’s the catch? Well not a catch so much, but there’s two bits to it – how much you’re earning and how much you’re putting into your account. If you put $1,000 into your super and you’re earning up to $37,697 you’ll get the full amount. Bam $500. Thank you very much. Earning more? The benefit works on a sliding scale so you’ll still get some money courtesy of the government but just not as much before it tapers off completely at $52,697.
So there you have it. As always make sure you read up on all the details, and consult an accountant or financial advisor so that you don’t trip up on anything if you’re still unsure. But hopefully these three tips that not only help to fatten up wallet in your twilight years, but also help you get more out of your super savings today!
* The one exception here is big earners who take home $250,000 or more a year – you’ll be paying 30% on your personal super contributions which while not quite as great as the rest of us is probably a whole lot less than your current tax rate. TBH if you’re earning that much you probably don’t need this blog.