Use your su­per pow­ers to be a re­tire­ment hero

Sunday Tasmanian - - News - AN­THONY KEANE

of Aus­tralia’s su­per­an­nu­a­tion rules are just silly.

Our gov­ern­ments want us to fund our own re­tire­ment — so they don’t have to pay pen­sions — yet they con­tinue to cre­ate wacky laws.

These laws stop us from boost­ing nest eggs, pun­ish us if we’ve been too suc­cess­ful at mak­ing money, and some­times put the brakes on be­fore we even get started.

De­spite the hur­dles, su­per re­mains the best place to save for the fu­ture be­cause of its low 15 per cent tax rate dur­ing your work­ing years, and zero per cent tax when you re­tire.

All you have to do is get your head around the stupid su­per rules, and plan a lit­tle more. Peo­ple can pump ex­tra money into su­per be­fore in­come tax gets taken out. This ex­tra de­posit — called a con­ces­sional con­tri­bu­tion and of­ten done via salary sac­ri­fice — only gets taxed at 15 per cent rather than the mar­ginal in­come tax rate of up to 47 per cent.

How­ever, the Gov­ern­ment has a cap, and this year it low­ered the cap from $35,000 to $25,000. That still might seem like a lot of money, but many peo­ple only have the fi­nan­cial fire­power to pump ex­tra cash into su­per later in life once their mort­gage and chil­dren are gone, so they may run out of time.

The $25,000 cap also counts com­pul­sory em­ployer con­tri­bu­tions of 9.5 per cent of work- ers’ wages, which takes up al­most one-third of the cap for an av­er­age wage earner.

The best way to com­bat this is to start pump­ing ex­tra money into su­per ear­lier in life, if you can. There’s a way to get larger amounts of money into su­per, but that’s been cut back too.

Non-con­ces­sional con­tri­bu­tions are money you pay into su­per after it’s al­ready been taxed — per­haps from sell­ing an in­vest­ment, or just hav­ing a lazy $100,000 of un­spent wages sit­ting in a sav­ings ac­count.

This cap used to be $180,000 a year, but on July 1 it was cut back to $100,000.

The good news is there’s a bring-for­ward rule that al­lows you to make three years of con­tri­bu­tions in one year. And that’s per per­son, so if a cou­ple sells an in­vest­ment prop­erty they could each in­ject $300,000 into su­per. Get the tim­ing right and they could de­posit $400,000 each within a week. Su­per works best when al­lowed to grow over many decades, yet our cur­rent rules mean the youngest work­ers — who can ben­e­fit the most — don’t al­ways get it.

Em­ploy­ers don’t have to pay their work­ers su­per if they earn less than $450 a month, so stu­dents, part-timers and young peo­ple hold­ing down sev­eral dif­fer­ent jobs of­ten miss out.

While lob­by­ing con­tin­ues to get the rules changed, in the mean­time peo­ple should con­sider the co-con­tri­bu­tion scheme, where the Gov­ern­ment pays up to $500 a year into the funds of low-in­come earn­ers if they — or their par­ents or grand­par­ents — pay in $1000 of their own money. That’s about $19 a week for a 50 per cent boost.

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