Superannuation - Pay less Tax

Make the most of government tax concessions to help build your superannuation nest egg. For example, personal tax rates can be as high as 46.5% whereas your superannuation fund will only pay 15% on tax deductible contributions when the money is deposited into your account.

Investment earnings while your money is in the fund will be taxed at no more than 15% (again, likely to be less than personal income tax rates on other investments). Any realised capital gains on investments held by your superannuation fund are taxed at 10 – 15%, depending on how long they have been held for.

Once you turn 60, and retire, any withdrawals from your superannuation fund are tax free. This applies whether you are drawing an income stream or lump sums.

If you retire between 55 and 59 tax may be payable on superannuation withdrawals, however there are concessional tax free withdrawal amounts and tax rebates, depending on your situation.

In general, you can get your money out of your superannuation fund when you reach 65 or when you permanently retire from the workforce and have reached the minimum age set by law (between 55 and 60 depending on your date of birth).

New transition to retirement rules also provide the option, for those aged 55 or above, of drawing an income stream from your superannuation fund and continuing to work part time.

Act Before June 30
There will be a 50% reduction in tax deductible superannuation contribution limits from 1 July 2009.

For the self employed, or under 65 and not employed, your tax deductible contributions will reduce from the current amount of up to $50,000 pa to $25,000 pa.

If you turn 50 or over in any financial year up until June 2012 your tax deductible contributions limit is currently $100,000, from July 1st 2009 this will reduce to $50,000.

If you are an employee you will have 9% of your salary contributed to your superannuation fund by your employer. You will also have the option of salary sacrificing a larger portion of your salary to superannuation. This can be very tax effective as the contributions tax paid by superannuation funds is 15% while the marginal tax rate for earnings above $34,000 ($35,000 from 1 July 2009) is at least 31.5% (including medicare levy).

The contribution limits for tax deductible contributions for employees are also $50,000 or $100,000 ($25,000 and $50,000 from 1 July 2009), depending on your age. Both the 9% employer contribution and the amount salary sacrificed are included in determining these amounts.

It is important to consult a professional financial planner who will be able to assist you determine the most suitable superannuation strategy for you.

The information given in this article is of a general nature and has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision on the basis of the advice above, a prospective investor needs to consider, with or without the assistance of a professional adviser whether the advice is appropriate in the light of their particular investment needs, objectives and financial circumstances.

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