Are You In The Know When It Comes To Superannuation
Are You In The Know When It Comes To Superannuation
Superannuation is a tax effective way to save for your retirement. It is designed to ensure that we save enough money throughout the course of our working lives to have sufficient funds available to us in retirement. Generally, you will not be able to access this money until you retire, for practical purposes not until you are 60.
If you are employed, you stand to benefit from super guarantee (SG) contributions from your employer which require them to contribute 9.5% of your salary into your account on your behalf. However, if you are self-employed it’s up to you provide for your retirement income. Super funds will invest your money, together with that of other members, in a mix of assets with the aim of growing it over time.
Knowing what is superannuation and how it works can give you greater control and the confidence to make the financial choices that are right for your needs.
Why invest in superannuation
Superannuation was created to specifically help you save your money and protect your financial future. Super is an environment that gets preferential tax treatment with the Federal Government providing generous tax incentives for contributions, during investment, and in retirement.
As such, you can get better investment returns than a bank savings account. The only difference is that, with superannuation, you won’t be able to access your money until you retire, or at 60, but that can be a good thing if you’re not so good at saving.
Choosing a super fund
Although it’s with some exceptions, most Australians have the freedom to use a super fund of their own choosing. It is very crucial that you do your due diligence when selecting a super fund. It can be the difference between a dream retirement and a financially gloomy one. Depending on your income, the difference between good and poor super fund choices can amount to a six-figure sum by the time you reach retirement.
When choosing your super fund, you should look at the investment performance, fees and
Types of superannuation funds
There are several different types of superannuation funds. The common one include;
- Corporate fund – Are established by an employer and are usually limited to their staff but spouses of employees may be eligible to join.
- Retail fund – Operated by financial services
organisations and membership is usually open to all individuals - Industry fund – Were originally set up to cater for individuals in a particular industry but now membership is open to the public.
- Self-managed super fund – Are self-operated and can have up to four members. The members (trustees) of the SMSF are responsible for the administration, operation, compliance and investment strategies of the fund. It’s ideal for individuals with big super funds who would like If you would like more control over their money.
Making superannuation contributions
Superannuation is just as important for tradies as it is for regular employees. If you pay yourself a wage, you can submit 9.5% of your pre-tax income to the super fund. However, note that making super guarantee (SG) payments for yourself is optional. The best and most common way to make your contributions is by paying a lump sum when your cash flow allows it.
Starting this financial year, you will be able to claim a full deduction for the contribution you make to your super until you turn 75 years old. However, keep in mind that any amount exceeding the contributions limit, currently $25,000, in any given year may attract a tax.
Make sure your super fund has your tax file number (TFN). If it doesn’t, your super contributions will be taxed an additional 34% and additionally, it may be hard to keep track of your super.
Start with super now!
By the time you retire, your super is likely to be one of your most valuable assets. Taking control of your super today will likely result in you enjoying a more rewarding retirement. It may be that your retirement is ages away or just around the corner. Either way, it’s important to know you’ll be able to afford the lifestyle you deserve when you retire. Basically, your superannuation will depend on your individual circumstances, such as your current income, age and desired retirement age and income.
At the Tradie Accountant Australia, our vastly experienced accountants can provide you with the superannuation advice and information you need. If you are interested, you can contact us here. Alternatively, our consultants love to chat and you can go ahead and call us on 1800 95 75 85.
Source URL: http://thetradieaccountant.com.au/know-it-comes-superannuation/
