When you know the superannuation contribution limits – and the different ways to add money to your super – you can boost your annual tax refund and save painlessly for your retirement.
A healthy Superannuation fund is an important part of planning for your retirement.
Putting extra money into your superannuation is a great investment in your future. Once it becomes a habit, it is a pretty painless for most people. However, if you do it wrong, you could face costly penalties that erase the tax advantage of your super contributions.
Check the superannuation contribution limits to ensure you contribute correctly because if you go over the limits, it can be costly and waste your savings.
Salary Sacrifice to Your Superannuation Fund
An easy way to contribute is through salary sacrifice. This is extra money your request to go directly from your employer into your super fund. That money is subtracted from your taxable income, reducing the tax you pay each year. There is a limit on the amount of additional money you can put into your superannuation fund each year.
How you contribute to your superannuation fund plays a part in determining the differences in tax benefits. You can choose to contribute before you receive your pay (salary sacrifice) but there is a limit on the amount. This is called the ‘concessional contributions cap.’
An alternative to salary sacrifice is non-concessional contributions. In general there contributions are paid into your super from your own personal pay, after tax.
Note: The non concessional contributions cap will decrease on 1st July 2017 to $100,000 a year.
If you can financially afford to do so, contribute to your superannuation on a regular basis as it can have a positive long term impact. Still unsure? Talk to one of Melbourne financial planners about the tax benefits of contributing.