The Ultimate Guide to Managing Your Superannuation Part 2

This checklist provides the essential guide to protecting one of our biggest assets – super. cont’d.

How Much Super Do You Need?

This is not an exact science, however a good rule of thumb is to first determine when you want to retire and what type of income will suit your preferred retirement lifestyle. You should then calculate the amount of money you will need to sustain you and your dependants during your retirement days. After you have settled on the amount of money, you should then take stock of what you have: perform a financial stocktake.

The gap between what you have in form of super and other savings and the amount of money you need for your retirement could be a deficit or an excess. In case of a deficit, you will have enough reason to take advantage of super opportunities to close the deficit. If you have substantial assets outside super, you could also consider transferring some or all of your assets to super under certain circumstances.

There are many variables in calculating your final retirement income, a guideline may be that you want to maintain your existing lifestyle income. For example if you need $50,000 per annum in todays dollars you may need superannuation or an asset that is large enough to fund this for 20 years or more. A portfolio of assets worth $1,000,000 generating 5% per annum would support a $50,000 income as an example.

Consider Utilizing Your Concessional (Before Tax) Contributions Cap

Concessional contributions are particularly appealing from a tax saving point of view to individuals paying more than 15 cents in the dollar tax and to those interested in offsetting a large capital gains tax bill. You should however be wary of exceeding your concessional contributions cap as you will face a penalty tax. It is therefore prudent to check the level of contributions you make, and/or are made by your employer on your behalf to make sure that they do not exceed your concessional contributions cap.

Consider Utilizing Your Non-Concessional (After Tax) Contributions Cap

For individuals- You are allowed to make non-concessional contributions of up to $180,000 in this 2014/15 financial year. What?s more? If you are below the age of 65, you can bring forward up to 2 years? worth of non-concessional contributions.

For small business owners – If you are a small business owner you may qualify for the $1.355 million concessional contributions cap (which is the lifetime contribution limit) for the 2014/15 financial year, in addition to the non-concessional contributions cap. You can also make personal contributions from the disposal of qualifying business assets thanks to CGT exemption rules. These rules are however somewhat complex and you should consider seeking the advice of a financial adviser.

Take Advantage Of Co-Contributions

You should determine whether you are eligible for co-contributions and take full advantage of them. Co-contributions are tax-free super contributions that the Federal Government contributes on your behalf when you make a non-concessional contribution (a contribution for which you have not claimed a tax deduction). 

Pass The Work Test Before Making Contributions If You Are 65 Or Over

If you are aged 65 or over, you must pass the work test before being allowed to make super contributions. To pass the work test, you must prove that you have worked for at least 40 hours in a 30 day period that falls in the financial year you wish to make super contributions. 

Seek Advice Of Independent Advisers When Making Major Financial Decisions

When making decisions with major financial and tax implications, it is wise to consult and independent professional adviser. The rule of thumb is to go for one with a solid understanding of super rules and one who charges a reasonable fee for the advice.

Access an independent financial adviser by working with My Money Calculator, you can reduce the complexities and the negative impact of excessive fees and have peace of mind in getting objective advice from independent professionals.

Go back to part 1

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