Warning: don’t read the following blog before bedtime. Don’t even read it out loud, especially if you are sitting in the passenger seat of a car and the driver doesn’t have ready access to Red Bull. The following blog contains some mild and conscience-changing language which is likely to send children into a boredom related stupor. Keep reading if you reckon you can handle some superannuation suggestions.
The super co-contribution is one of those rare things where you get something for nothing. If your income is below $31,920 and you make a $1,000 contribution to your super, the government will match it. That $1,000 isn’t part of the money your employer puts in or any you salary sacrifice. Once your income goes above $31,920 the amount the government chips in decreases until it cuts out entirely at $61,920. In theory it’s a good scheme, but in practice I don’t know many low income earners who have a lazy grand sitting around. From 1 July this year you will only be eligible for a maximum of $500 from the government for your own $1,000 contribution.
That’s the bad news. The good news is that if your income is below $37,000, from 1 July you will no longer have tax taken out of your employer contributions. Currently everyone’s employer contributions are taxed 15% as they go into your super account, but for low income earners that tax is being abolished. And the amount your employer has to put into your super will start to go up. Currently your boss has to put 9% of whatever you earn into super, but from mid this year it will go up to 9.25%, rising every year until it reaches 12% in 2019.
If you have a spouse earning less than $13,800 and you make a contribution to their super fund of $3,000 you can claim a rebate of $540, which is not much, but better than a poke in the eye with a rough stick. These contributions are not the ones that are eligible for super splitting. Most people are able to split the money paid into their super to their spouse’s fund (unless it’s a contribution they’re claiming a tax deduction or rebate from, like a spouse contribution. Yes, it all starts to get a bit complicated doesn’t it?)
Don’t forget that all money that goes into super these days stays there ‘til you hit retirement age. So don’t go whacking the money you had set aside for the when next credit card is due into your super, ‘cause you’ll need that bill paid before you are old and grey. The only time the tax office will let you get your hands on your super early is when you are about to die or you are completely financially stuffed. And I do mean completely stuffed. Super money is designed for retirement and the tax office makes it very hard to spend before you get there.
If you are self-employed, please please please don’t forget to pay yourself superannuation. You might see it as an unnecessary extra expense now but I can assure you that you won’t think of it that way in the years to come.
I hope you are still awake.