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Making the most of your super limits

Getting more money into superannuation is a proven way of building wealth to spend in retirement.

 

Ongoing contributions from your employer over the course of your working life, and potentially extra contributions made by you, can make a huge difference to your super balance over the long term as your account balance continues to grow.

Best of all, super contributions are only taxed at 15 per cent up to prescribed annual limits. And, when you finally reach retirement age, your super can be converted into a tax-free pension income stream. You can also pull out your super money tax-free after retirement via one or more lump sum payments.

But how much extra money can you put in each year, and what’s the best way of doing it?

Know your super limits

The starting point to making extra super contributions is to know exactly how much you’re allowed to put in.

At the start of July this year the minimum guaranteed amount of super that all employers must pay their workers aged 18 and above into a registered super fund account was lifted from 10 per cent of their ordinary wage to 10.5 per cent.

Employers must also pay super at the same rate to any employees aged under 18 who work more than 30 hours a week.

At the same time, the total amount of money that can be put into super each year at the “concessional” 15 per cent tax rate – including employer contributions – was increased from $25,000 to $27,500 this year.

And the amount that can be directed into super using after-tax money was increased from $100,000 per year to $110,000. These are known as non-concessional super contributions.

Ways to boost your super contributions

Salary sacrificing: The simplest way to get more money into your super is to let your employer know, and to arrange for them to make the extra contributions to your super fund on your behalf directly from your pay during each payment cycle.

Instead of paying your normal rate of tax on these extra contributions you’ll only pay the 15 per cent concessional contributions rate (which is automatically deducted).

You can generally specify with your employer that you want a set percentage rate (of your salary) or a fixed dollar amount to be “sacrificed” into your super fund on top of the mandatory 10.5 per cent in super they have to pay.

Thanks to compounding investment returns, even small extra amounts paid every pay cycle from your before-tax earnings will go a long way towards increasing your retirement nest egg over time.

One-off payments: In addition to salary sacrificing, it’s also possible to add money into your super fund using other money you’ve accumulated over time.

You’ve probably already paid tax on this money at your normal tax rate, so the Tax Office allows you to deposit it into your fund at any time during the financial year and then claim a deduction for the tax you’ve paid above the 15 per cent super tax rate.

You first need to check with your super fund if it allows after-tax contributions and then lodge a ‘Notice of intent to claim or vary a deduction for personal contributions’ form when you lodge your next tax return. After-tax contributions can be used in conjunction with pre-tax contributions, including those made by your employer.

Catch-up contributions: You may also have scope to make extra concessionally taxed (15 per cent) super contributions under “catch-up legislation” introduced from the start of the 2019-20 financial year.

This allows you to carry over any unused annual concessionally taxed contributions (that is, if the total payments into your super fund including your employer’s payments are less than the $27,500 maximum annual limit) on a rolling basis for up to five financial years.

In other words, if $20,000 in concessional contributions were made into your account in 2020-21, you may be able to take advantage of your unused gap from last financial year and roll it over into your 2022-23 contributions.

You can make catch-up contributions at any time, and then claim a tax deduction in your next tax return.

You’re able to check what’s available to you in catch-up contributions by logging into the myGov website, navigating to the Australian Taxation Office, selecting Super and “Carry forward concessional contributions” under Information. To take advantage of this option your overall super balance must be below $500,000.

Non-concessional contributions: Non-concessional contributions are after-tax personal contributions you make into your super fund, which can’t be claimed as a tax deduction.

They’re completely separate from your annual concessional contributions and are subject to their own annual limits.

Typically, non-concessional contributions are made using the proceeds from larger asset sales such as from a home or investment property.

The non-concessional contributions limit is currently $110,000 each financial year. However, under what’s known as the “three-year pull-forward rule”, you can make a $330,000 non-concessional contribution in one financial year.

You’re then unable to make further non-concessional contributions for the next three financial years.

If you have more than $330,000 to contribute in total, you could make use of the annual $110,000 limit before 30 June next year. Then, from 1 July, you could use the three-year pull-forward rule to contribute up to another $330,000.

The main advantage of making non-concessional contributions is to have more of your money inside the super system that can generate tax-free earnings in retirement.

Downsizer contributions: The “downsizer measure” enables individuals aged 60 years and above to add up to $300,000, and couples up to $600,000, into their super from the proceeds of their principal place of residence.

A downsizer contribution forms part of the tax-free component in your super fund. It can be made in addition to non-concessional super contributions and doesn’t count towards your personal super contribution limit.

There are a range of conditions around downsizer contributions, and it’s prudent to check these on the Tax Office website.

Exceeding the limits

It’s important to be aware of all the super contributions boundaries.

Excess concessional contributions are included in assessable income and taxed at your marginal tax rate.

The Tax Office applies a 15 per cent tax offset to account for contributions tax already paid by your super fund.

You then have the option of withdrawing up to 85 per cent of any excess concessional contributions from your super fund to help pay your income tax liability.

If you don’t you could be taxed heavily and any excess concessional contributions not released from your fund are counted towards your non-concessional contributions cap.

 

 

 

Tony Kaye
Vanguard
vanguard.com.au

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About this policy

METRISCOPE Financial Pty Ltd (METRISCOPE) recognises the importance of privacy and is committed to protecting the privacy of individuals when handling their personal information.

This Privacy Policy explains in an open and transparent manner how METRISCOPE will collect, hold, use, disclose, protect and otherwise handle your personal information in accordance with the Australian Privacy Principles contained in the Privacy Act 1988 (Cth).

When you provide METRISCOPE with personal information you consent to its use, disclosure and handling of your personal information in accordance with this Privacy Policy as amended from time to time.

Your Personal Information METRISCOPE collects and holds

METRISCOPE will collect and hold your personal information for the purposes of providing our investment services and products to you.

The kinds of personal information that we may collect and hold include your name, date of birth, tax file number, email address, home address, phone number and bank account details.

Where you do not provide us with all or some of your personal information that we request then we may not be able to provide you with our services.

Personal information collected and held

METRISCOPE collects your personal information directly from you and through our intermediaries when you complete fund application forms. METRISCOPE may also collect data from its registry services.

Other ways METRISCOPE may collect your personal information includes in person or by telephone, letter, facsimile or email.

METRISCOPE may hold personal information collected in both physical and electronic storage facilities including paper-based files and computer databases.

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METRISCOPE may use and disclose personal information collected and stored to enable us to provide the financial services and products to you and for other related legal purposes.

For example, we may use and/or disclose your personal information to:

  1. verify your identity;
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  3. comply with laws, regulations, rules, directions or requests from METRISCOPE’s regulatory bodies and/or other government agencies;
  4. comply with METRISCOPE’s own internal policies and procedures.

Where it is legal and necessary to do so, METRISCOPE may disclose your personal information for the purposes described above to our suppliers, contractors, professional advisers, government agencies and regulators or parties involved in the management of your account.

These third parties may be in other countries where laws in relation to the processing of personal information are not consistent with the Australian Privacy Principles or the Privacy Act.

While METRISCOPE may take steps to try and ensure that these third parties do not breach the Australian Privacy Principles in relation to your personal information, the overseas recipient may breach the Privacy Act and/or the Privacy Principles and this may be due to that countries own laws.

By providing us with your personal information you accept that we may make disclosures to overseas recipients on this basis.

METRISCOPE will protect your personal information

METRISCOPE will take all reasonable steps to protect your personal information it holds from misuse, interference and loss, and from unauthorised access, modification or disclosure using both physical and electronic security measures.

By providing us with your personal information over the Internet you accept that such information will be transmitted at your own risk as the security of such information cannot be guaranteed.

METRISCOPE will not retain your personal information, unless required by law, if it is no longer needed for any purpose for which we may lawfully use or disclose it.

Access, correction and complaints regarding your personal information

You may request METRISCOPE to provide you with access to any of your personal information held by us. You should promptly notify METRISCOPE if you become aware that any of your personal information held is inaccurate, out-of-date, incomplete, irrelevant or misleading.

If you have any concerns about whether METRISCOPE has complied with this Privacy Policy or the Privacy Act you can raise your concerns with our Compliance Manager.

You can contact our Compliance Manager via email, fax, telephone or by post on the details set out below. Our Compliance Manager will investigate your complaint and advise you of the outcome.

If you are not satisfied with our response you can complain to the Office of the Australian Information Commissioner.

You can contact our Compliance Manager using the contact details below:

Compliance Manager

compliance@metriscope.com.au

Phone: 02 9659 3955

Fax: 02 9659 4912

Address: PO Box 2036, Castle Hill NSW 1765

We will acknowledge receipt of a complaint within 1 business day, however, where this is not possible, acknowledgement will be made as soon as practicable. We will then investigate the complaint and respond to you within 30 days. Some complex matters may require an extension to thoroughly investigate the complaint and bring it to resolution. If additional time is required, we will advise you in writing.

If you are not fully satisfied with our response, you can contact an external body. In cases of privacy related complaints, this is generally the Office of the Australian Information Commissioner (OAIC).

The contact details for OAIC are:

Mail GPO box 5218 Sydney NSW 2001

Phone 1300 363 992

Email enquiries@oaic.gov.au

Online www.oaic.gov.au

You may also direct privacy complaints related to financial advice to the Australian Financial Complaints Authority (AFCA). The contact details for AFCA are:

Mail GPO Box 3, Melbourne, VIC 3001

Phone 1800 931 678 (free call)

Email info@afca.org.au

Online www.afca.org.au

Privacy Policy updates

We may update this Privacy Policy from time to time to take into account changes in our practices for the handling of personal information by publishing an amended Privacy Policy. You should regularly review the most recent version of this Privacy Policy.

Complaints Policy

Complaints Resolution

If you have a complaint we would like you to tell us so that we can address the matter. We are committed to the efficient and fair resolution of complaints.

How you can lodge a complaint

If you wish to make a complaint, please contact our Compliance Manager on the information below:

Compliance Manager
compliance@metriscope.com.au
Phone: 02 9659 3955
Fax: 02 9659 4912
Address: PO Box 2036, Castle Hill NSW 1765

Our complaint process is free of charge to you. Your complaint does not need to be in writing. If you require any assistance to lodge your complaint, please let us know. You may also choose to authorise a representative to make a complaint on your behalf.

We are bound by the Privacy Act, and we manage and protect your personal information in accordance with the Australian Privacy Principles.

How we will deal with your complaint

We will respond to your complaint in a timely and flexible manner. Our goal is to ensure the earliest possible resolution and we will try to resolve your complaint wherever possible at the first point of contact. Where your complaint is urgent it will be prioritised.

We will ensure you have the opportunity to explain your complaint. To this end we ask that where possible, that you provide the following information about your complaint:

We will address your complaint fairly and consistently, treating each complaint in an un-biased manner, and ensuring all allegations are investigated thoroughly. We will inform the financial adviser or mortgage broker involved about your complaint and ask them to respond to us.

Once your complaint is resolved any agreed outcomes will be implemented in a timely manner.

How and when we will communicate with you about your complaint

We will acknowledge the receipt of your complaint within 1 business day verbally or in writing.

Where this is not possible, acknowledgement will be made as soon as possible.

We will investigate your complaint promptly and respond to you within 30 calendar days. Our response will include:

If we are able to resolve the complaint to your complete satisfaction within 5 business days, we may not provide a written response unless you request a response in writing.

Some complex matters may require additional time to thoroughly investigate the complaint and bring it to a resolution. Where additional time is required, we will advise you in writing within 30 calendar days of receiving the complaint. We will explain the reasons for the delay.

We will communicate openly throughout the process.

If you are not satisfied with the resolution of your complaint, you can lodge a complaint with the Australian Financial Complaints Authority (AFCA).

Your right to lodge a complaint with AFCA

If an issue has not been resolved to your satisfaction, you can lodge a complaint with AFCA. AFCA provides fair and independent complaint resolution that is free to consumers. The contact details for AFCA are:

Mail GPO Box 3, Melbourne VIC 3001
Phone 1800 931 678 (free of charge)
Email info@afca.org.au
Online www.afca.org.au

About this Policy

We may amend or update our Complaints Policy as required by law or as our business processes changes.