There are a few common financial planning strategies that may be appropriate for businesses and individuals looking to take control of their finances and plan for the future.

Concessional contributions.

The contributions cap for concessional contributions for those aged over and under 50 is $25,000 for the 2012/2013 financial year. Those which have exceeded this limit will face a penalty tax of 31.5%, in addition to the 15% tax payable on contribution. The excess concessional contributions also count towards the non-concessional cap. For those aged 65 or over, they must first satisfy a work test in order to make super contributions.

Government co-contributions.

There are government incentives in place for making after-tax contributions to super, with the government co-contribution scheme designed for low to middle income earners earning up to $46,920 (2012/2013). For those who have made an after tax contribution and are earning up to $31,920, the government will contribute up to a maximum of $500 tax-free into the super fund. For example if the non-concessional contribution  is $800 for someone earning up to $31,920, then the Government will contribute $400, representing an instant return of up to 50% on contributions.

The amount the government contributes decreases by 3.33c for every dollar above the $31,920 and cuts out at $46,920. It is exempt from being included as income in tax returns.

Spousal contributions.

Making an after-tax contribution to a dependant spouses’ superannuation account can result in a tax offset, provided that the spouse is under 65, or up to 70, provided they are still working.

Those who contribute at least $3,000 to the spouses’ account are eligible for the full tax rebate of $540, as long as their spouses’ assessable income is less than $10,800 for the year. If less than $3,000 is contributed then the rebate will be equivalent to 18% of the contributions.

If the spouses' income is higher than $10,800, the rebate decreases until it is capped if the income exceeds $13,800 a year.

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There are changes coming with the Federal Government’s review of the superannuation industry, but many of these are gradual ones, such as the move to increase minimum compulsory employer contributions, or Superannuation Guarantee (SG), from 9% to 12% by 2019.

While 2019 may seem a long way off, Pauline Vamos, chief executive of the Association of Superannuation Funds of Australia (ASFA), an industry body for the superannuation sector, recently predicted that a higher SG would make a significant difference to retirement outcomes.

“For a person 30 today, earning $50,000 a year and with a current super account balance of $23,000, their lump sum on retirement will increase from $300,000 to $385,000 with the move to 12% SG,” says
Pauline (ASFA media release 29 June 2010).

Five Superannuation Strategies

Now you can start to think about some strategies to boost your super balance.

To get an idea of how much you’ll have in retirement and how much extra you’ll need to reach your goal, speak with your financial planner.

1) Salary sacrificing can be a good bet

Salary sacrificed super contributions are taxed at a maximum 15%, instead of your marginal tax rate, which could be as high as 46.5%, which can leave you with more super. But beware of the concessional
contribution caps. (See table 1).

2) Give co-contribution a go

This applies to those with an annual income below $61,920. If you earn less than $31,920 per annum and you contribute $1,000 to super during that financial year, the government could potentially match your contribution dollar for dollar. As your annual income increases up to the maximum of $61,920, the government contribution reduces.

3) Consolidate your super accounts

If you’re one of the many Australians who have multiple super accounts, you could be paying extra in unnecessary fees.

Consolidating your accounts could save on fees and time, and as a result may boost returns. Remember to check how the benefits in your various funds may be affected, such as insurance cover, or whether exit or withdrawal fees apply.

4) Spouse contribution tax rebate

A working person can contribute super on behalf of their spouse in a number of ways which could provide some tax benefits.

Some examples include making an after-tax contribution that’s eligible for a tax rebate or splitting or transferring the working person’s salary sacrifice contributions to the spouse.

5) Align your super strategies with your personal circumstances

It is important to revisit your super strategies with your financial planner as your personal circumstances change. For example, have your financial responsibilities decreased and you can consider increasing your salary sacrifice amount? Or, perhaps your income has decreased, making you eligible for a government co contribution.

Source: Colonial First State, October 2010

Speak with a financial advisor with regards to your financial plans and superannuation strategies concerns.  For more details call Leenane Templeton Wealth Management on 02 4926 2300 or visit our Newcastle financial planning website or our specialist web site for self managed super funds.

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