How couples can benefit from the “perks”
CASE STUDY 1
Plan: to maximise government and spouse contributions.
Circumstances: Mary is working part time and earning $20,000pa. Her partner David is on a large income.
Mary and David discuss ways in which they can boost Mary’s super. They take the following steps:
• Mary makes a $1000 non-concessional (after-tax) contribution to her fund.
• David makes a $3000 non-concessional spouse contribution to Mary’s super fund. Result: As well as Mary’s super fund growing by $4000, the other benefits are also realised:
Mary receives a $500 government co-contribution to her super fund as a result of her contribution.
David is eligible to claim a tax offset (rebate)* of $540 when he does his tax return as a result of making a spouse contribution to Mary’s super.
Note: Mary’s total super balance must be below $1.6 million at the previous June 30 to be eligible for these benefits. Other contribution and eligibility requirements must also be met.
CASE STUDY 2
Plan: to make the most of unused concessional contributions. Circumstances: Over the past few years, Jane has had to reduce her paid working hours to raise her young children. During this time, she was receiving $5000 in employer SG contributions.
Now that her children are more independent, Jane takes the opportunity to apply for a new well-paid, full-time job.
Because she is getting a higher income, she wants to build her retirement nest egg and hopefully save some tax along the way. However, she is aware that the annual concessional cap is $25,000pa (rising to $27,500 from July 1, 2021) and if she exceeds the cap there are penalties.
Jane can take advantage of the carryforward provisions: if you have not fully utilised the concessional cap you can bring them forward for up to five years to use in subsequent years. Jane is receiving $14,000 a year in employer SG (super guarantee) contributions and she decides to make $26,000 in annual salary sacrifice (pre-tax) contributions, giving her a total of $40,000 of annual concessional contributions. Result: Jane has boosted her retirement savings but also still remains well within her concessional cap. She can continue to use this strategy until she exhausts her carryforward amount, or until her total super balance exceeds $500,000.
Salary sacrifice contributions are taxed at only 15% rather than at her marginal tax rate. Assuming Jane is on a marginal rate of 39% including Medicare, she saves $6240 annually ($26,000 taxed at 15% rather than 39%).
Note: Jane’s total super balance must be below $500,000 at the previous June 30 to be eligible to use the carry-forward provisions. Concessional contributions are made up of SG contribution, salary sacrifice contributions and contributions that you claim as a tax deduction. Other contribution and eligibility requirements must also be met.