To provide an insight to why the government has placed enormous importance on superannuation in recent years, consider the following facts:
Today: There are six taxpayers to every one pensioner.
15 years time: There will be an estimated three taxpayers to every one pensioner.
In the past it was automatically assumed that when you retired from the workforce you would receive the age pension. With an ever increasing and aging population, the availability of the pension cannot be relied upon. People are also retiring earlier and living longer and this means that more and more people are going to have to fund for their own retirement.
Whilst the government has legislated to address this issue with the introduction of the superannuation guarantee levy, in most cases this will not be enough. This all means that you need to pay closer attention to your superannuation savings and the level of performance, security and flexibility offered by your current fund. You must review or make plans now to self fund your retirement.
While superannuation can be transferred between superannuation funds you should be aware that contributions to superannuation are almost always compulsorily preserved. This means that they generally can not be withdrawn until you are over 60 (or over 55 if you were born before 1 July 1960) and are retired.
Superannuation is one of the most tax-effective ways of saving for retirement. The earlier you start, the longer you have to invest towards your goal and the lower the amount you may need to invest on a regular basis.
When you invest regularly, you will enjoy the effects of compounding. Compounding occurs when income earned on your savings is re-invested, so you earn money on your initial capital, as well as on any income you have already earned.
How to choose a superannuation fund?
Portability – make sure that if you get a new job, you can invest the contributions from your new employer into the same super fund. This will save you opening another account and paying more fees.
Rollover facilities – make sure that when you retire, you can rollover your lump sum into an allocated pension or term allocated pension account.
Insurance – you should be able to easily access insurance for death, total and permanent disability and income protection through your superannuation fund.
Communication – you should expect to access your account information online and on the phone.
Fees and charges – these may apply when you make contributions, during the investment phase, and when the money is paid to you. Make sure you are fully aware of all relevant fees on your account.
Flexibility - can the fund accept spouse contributions; are you limited / charged to switch investment options?
Investment Choices – are there not only single funds i.e. Shares, but also Multi-Manager Funds to invest your money in?
Superannuation is a savings vehicle for your future.
The advice contained herein does not take into account any persons particular objectives, needs or financial situation. Before making a decision regarding the acquisition or disposal of a Financial Product persons should assess whether the advice is appropriate to their objectives, needs or financial situation. Persons may wish to make this assessment themselves or seek the help of an adviser. No responsibility is taken for persons acting on the information provided. Persons doing so, do so at their own risk. Before acquiring a financial product a person should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product.
Sunday, May 31, 2009
Sunday, May 3, 2009
Boost Savings & Save Tax Via Salary Sacrifice
It’s a fact – we all need to take responsibility for funding our retirement. So if you are looking for a simple and tax effective way to boost your retirement savings, you may want to consider a strategy known as salary sacrifice.
Salary Sacrifice involves getting your employer to contribute some of your salary, wages or a bonus payment directly into super – before tax is deducted at your marginal rate (which could be up to 46.5%). The advantage of this strategy is that salary sacrifice super contributions are taxed at a maximum rate of 15% - a potential tax saving of up to 31.5%.
By implementing this strategy you can save on tax and make a larger investment for your retirement.
To use this strategy you will need to make an arrangement with your employer that is prospective in nature. In other words, you can only sacrifice income that relates to future performance. When sacrificing regular salary or wages, the agreement should commence on the first day to which the next pay period relates.
However, you may only salary sacrifice a bonus payment to which you have no previous existing entitlement. In practice, this means the arrangement must be made no later than the day before the employer determines your bonus entitlement.
In both cases, it’s also important to have the agreement thoroughly documented and signed buy both parties.
You need to be aware:
· A salary sacrifice arrangement may result in a reduction in other benefits such as leave loading, holiday pay and Superannuation Guarantee contributions, as these benefits are often calculated on your base salary, you should check with your employer.
· Salary Sacrifice contributions must be preserved until permanent retirement after reaching your preservation age or a condition of release. So you need to ensure you have sufficient investments outside super if you plan to retire before reaching your preservation age.
· If you’re an employee (and your assessable income plus reportable fringe benefits are less than $58,000pa) you may also want to consider making a personal after-tax super contribution of $1,000. This may enable you to qualify for a Government co-contribution of up to $1,500.
· Although it is possible to sacrifice salary below the minimum entitlement under an industrial award, employers should be aware that they may still be required to provide the minimum salary or wages under industrial law.
The advice contained herein does not take into account any persons particular objectives, needs or financial situation. Before making a decision regarding the acquisition or disposal of a Financial Product persons should assess whether the advice is appropriate to their objectives, needs or financial situation. Persons may wish to make this assessment themselves or seek the help of an adviser. No responsibility is taken for persons acting on the information provided. Persons doing so, do so at their own risk. Before acquiring a financial product a person should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product.
Salary Sacrifice involves getting your employer to contribute some of your salary, wages or a bonus payment directly into super – before tax is deducted at your marginal rate (which could be up to 46.5%). The advantage of this strategy is that salary sacrifice super contributions are taxed at a maximum rate of 15% - a potential tax saving of up to 31.5%.
By implementing this strategy you can save on tax and make a larger investment for your retirement.
To use this strategy you will need to make an arrangement with your employer that is prospective in nature. In other words, you can only sacrifice income that relates to future performance. When sacrificing regular salary or wages, the agreement should commence on the first day to which the next pay period relates.
However, you may only salary sacrifice a bonus payment to which you have no previous existing entitlement. In practice, this means the arrangement must be made no later than the day before the employer determines your bonus entitlement.
In both cases, it’s also important to have the agreement thoroughly documented and signed buy both parties.
You need to be aware:
· A salary sacrifice arrangement may result in a reduction in other benefits such as leave loading, holiday pay and Superannuation Guarantee contributions, as these benefits are often calculated on your base salary, you should check with your employer.
· Salary Sacrifice contributions must be preserved until permanent retirement after reaching your preservation age or a condition of release. So you need to ensure you have sufficient investments outside super if you plan to retire before reaching your preservation age.
· If you’re an employee (and your assessable income plus reportable fringe benefits are less than $58,000pa) you may also want to consider making a personal after-tax super contribution of $1,000. This may enable you to qualify for a Government co-contribution of up to $1,500.
· Although it is possible to sacrifice salary below the minimum entitlement under an industrial award, employers should be aware that they may still be required to provide the minimum salary or wages under industrial law.
The advice contained herein does not take into account any persons particular objectives, needs or financial situation. Before making a decision regarding the acquisition or disposal of a Financial Product persons should assess whether the advice is appropriate to their objectives, needs or financial situation. Persons may wish to make this assessment themselves or seek the help of an adviser. No responsibility is taken for persons acting on the information provided. Persons doing so, do so at their own risk. Before acquiring a financial product a person should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product.
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