Dear Joy Friends
So you have just relocated to Australia and you or your partner have started a new job and you are trying to make sense of the Australian superannuation system. Well I don’t know a lot about it but thankfully my husband is a financial planner and he has offered up his expertise on the matter that will hopefully shed some light on it for you, to help make sense out of it all. Over to you Matt.
Superannuation in Australia is a mandatory retirement savings system which is paid by your employer to a superannuation account which has restrictions on when you can access it.
The current rate of superannuation contribution by your employer is 9.5% of your gross wage. You can choose your own superannuation fund or your employer will probably have a default fund for their employees.
Things to consider when choosing a superannuation fund are the total ongoing fees of the fund, investment choices, long term performance and insurance available within the fund ( i.e life, total and permanent disability and income protection).
In addition to the 9.5% that your employer contributes you can make additional personal contributions towards your retirement. There are two different types of contributions, concessional and non-concessional contributions.
Concessional contributions include salary sacrifice, employer contributions or self-employed tax deductible contributions. The limit per financial year
( from 1 July to 30 June) for concessional contributions is $25,000 if you are under 50 and $35,000 if you are 50 and over.
Non-concessional contributions are contributions made from your net income or savings eg.money sitting in a bank account, an inheritance or proceeds from the sale of a house. The limit per financial year for non-concessional contributions is $185,000.
What is the difference between these two contributions?
The tax you pay when contributing the money. Concessional contributions pay a 15% contributions tax (30% if you earn more than $300,000 per annum) but non-concessional contributions pay no tax.
What is the benefit of superannuation?
Superannuation is a tax advantaged investment scheme with a maximum tax rate of 15%. Which is lower than most people’s marginal tax rate and considerably lower than the top Australian tax rate of 48%.
As with any investment, it would pay to seek professional advice if you are unsure of the product and want to get the best out of the super fund you choose.
Thanks Matt for your great advice. If anyone has questions they can speak to and independent financial planner such as Matt and he works at Axis Investment Centre and you can get their details from us here at the Joy Project or click on the link to go to their website.
The Joy Girls xx