Basics of Superannuation

When the time comes to retire, it would be nice to feel confident that your life after work will be comfortable and that you’ll have the time and money to enjoy many things you weren’t able to do while working.

The Age Pension provides only a very basic retirement allowance that most people would find difficult to manage on. This is why it is so important to take control and set yourself up for your future now, by making regular personal contributions to your superannuation fund.

Potential tax advantages

The Australian Government offers powerful tax incentives to encourage us to save for retirement throughout our working lives. For example:

• Super contributions are taxed at concessional rates
• There is no limit to how much money you can accumulate in super over your working life, but contribution caps apply.
• When you reach 60 you can withdraw all your super savings tax-free.*

*applies to taxed funds only, ie. does not apply to untaxed funds such as the Commonwealth Government Super Scheme.

About super contributions

• If you’re an employee, your employer must, by law, contribute a minimum percentage of your wages (9.5%, gradually increasing to 12% from 1 July 2013, phased in over a 6 year period) into a complying super fund (including self managed super funds) on your behalf. Some employers contribute more, and some employees add more to their super fund by arranging with their employer to have a proportion of their pre-tax salary put into super. This is known as ‘salary sacrifice’. You can also make personal super contributions from after-tax money.
• If you’re self-employed, you can make personal deductible contributions to your super fund. Please note conditions apply.

How much super is enough?

To calculate how much super you’ll need in retirement, you will need to know:

• Your estimated life expectancy
• How much annual income you want to receive in retirement
• How much super you’ll need to produce that level of income.

A professional financial adviser can help you answer these questions, explain the various options available to you, and provide advice on the best strategy for your situation.

At John Bellas Financial Services Pty Ltd, we can provide advice on the most effective way to build your super balance and achieve your retirement goals within your time frame.