Tax-effective Super Incentives the Australian Government Offers

Saving through super can be much more tax effective than saving the same amount outside super. And this can make a real difference to how much money you’ll eventually have for your retirement.

Consider three scenarios:

  1. your employer pays you $5,000 salary in cash and you invest the money outside super (your marginal tax rate is 34%).
  2. your employer pays you $5,000 salary in cash and you invest the money outside super (your marginal tax rate is 46.5%).
  3. your employer pays $5,000 a year into your super account (15% contributions tax applies).
Tax-effective Super Incentives the Australian Government Offers

Salary sacrifice

If arrange for contributions to be made to superannuation from pre-taxed earnings above the 9% contributed by your employer, you will pay a maximum 15% tax on the extra contributions rather than your marginal tax rate (up to a certain limit or cap).

Additional spouse contributions

If your spouse earns less than $10,800 and you add to their super you could receive a tax rebate of up to $540. You can do this each year or when taking a lump sum.

Super splitting with your spouse

If you even out the super contributions between yourself and your spouse you may save in tax when you convert your super into a pension.

Co-contributions

If you earn less than $46,920 and make additional contributions to your super, the government could match 50% of your contribution (up to $500).

Access your super while still working

If you’re over 55 and working part time you can now access your super in the form of a pre-retirement pension and still contribute to super.

Small business capital gains tax (CGT)consessions

If you own a small business, the proceeds of the sale of certain assets may be contributed to super so you can minimise CGT as well as maximise your retirement savings. A lifetime $1.255 million limit applies to these amounts.

Roll your super over into an allocated pension when you retire

If you use your super to buy an ‘allocated pension’ (also known as an ‘account based’ pension) rather than cash it in, you can save tax on the lump sum. Another benefit is that the returns on your allocated pension are not taxed.

Pension payments and withdrawals over 60

If you are 60 or over your pension payments and lump sum withdrawals are not subject to tax.

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