Opportunites to Increase Your Retirement Savings
Happy New Year! Now that the festive season is over, and we are midway through the financial year, it is a good opportunity to prepare for any further planning before 30th June, 2014.
Your birthday, whilst being significant to you, is also a critical planning opportunity to save tax and improve your retirement savings.
For example, are you or your partner approaching an important birthday for planning purposes?
It is worthwhile to consider consolidating your assets for improved growth as you approach retirement. If you are already retired, you may not realise that you can save further tax and boost your retirement savings with the following opportunities.
Super in accumulation is taxed at 15% for all interest, dividends and short-term capital gains, being less than 12 months, long-term capital gains are taxed at 10%. Once in Pension phase, Super is tax-free, for all compliant funds. You may also use this opportunity to manage your member balances, if applicable.
Age 60, before 30th June? You are entitled to the higher concessional contributions limit of $35,000, whereby if you are employed; you can salary sacrifice the difference between your employer’s SGC contribution and $35,000. Be careful to include contributions to be assessed on bonuses or pay increases before end of financial year, so that you don’t over contribute.
You may also consider a transition to retirement (TTR) strategy, whereby you can put your Super into pension phase, and your growth including interest, dividends, and capital gains will be tax-free, and at age 60, the income you draw will also be tax free. If you are still working you will be limited to 10% as a maximum draw from your Super, unless you are retired, being over access age, when you will have full access to your Super.
Age 65, before 30th June? This the last opportunity you have available to contribute to Super without needing to pass the work test. The work test is 40 hours of bonafide employment or self employment in a 30 day period during the financial year of contribution, before deposit of monies. It is also the last opportunity you have to contribute a lump sum of $450,000 to Super, which may be useful if you are considering sale of your investment property. This is a three-year limit, whereby you cannot contribute again for a further two tax years. It is also worthwhile to know that you may be able to use a concessional contribution to reduce your taxable income from capital gains on sale, up to contribution limits. If you have turned age 65 during the financial year, you may still have access to this opportunity, however, you must be able to pass the work test.
Age 75, before 30th June? You will no longer be able to contribute to Super as a self-employed person. Only mandatory employer contributions can be accepted, i.e. SGC (9.25%) or award rate. You have a 28 days grace period of your 75th birthday to make your final contribution, which also requires you to pass the work test as you are over age 65.
We will be happy to assist you in the planning for your important financial planning birthdays and can provide further information particular to you. Also remember that as a couple you have double the opportunity for contributions or can plan your contributions according to your birthdays for maximum benefit.
FYE 30th June 2014:
|Under Age 60||Concessional contributions limit||$25,000|
|Turning 60 before 30th June||Concessional contributions limit||$35,000|
|Up to age 65||Non Concessional contributions limit||$150,000 pa or $450,000 3 year|
|Over age 65||Work test required||$150,000 Non concessional limit|
|Up to age 75||Work test required||Concessional and Non concessional|
|Over age 75||Only concessional contributions||Mandatory award rate up to $35,000|
Financial Planning Manager
Tel: (08) 9301 2200
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