Money going into your super

Decisions you make now about your super, like how much you contribute and where to invest, could impact the level of financial security you have when you retire. So, understanding more about your contribution options can help you take control and make your retirement goals more achievable.

Although your employer will generally make super contributions on your behalf, for many people employer contributions alone will not be enough to provide a comfortable lifestyle in retirement.

There are a number of ways you can build your super:

  • salary sacrifice; and
  • personal contributions.

Employer Superannuation Guarantee (SG) contributions

Superannuation Guarantee (SG) contributions are the mandated minimum employer contribution that most employers must pay their employees. This is also known as a concessional contribution.

The current SG rate is 9.5% of an employee’s ordinary time earnings if they earn a minimum gross (before tax) amount of $450 in a calendar month (subject to award requirements). The rate will gradually increase to 12% in future years.

Some employers may be required to pay more than the SG rate for employees covered by an award or other workplace arrangements.

SG contributions are usually subject to contributions tax at the rate of 15%. There is no limit on the amount of concessional contributions the Fund can accept, however limits (caps) apply for tax concession purposes.

The Low-Income Superannuation Contribution (LISC) will apply to eligible concessional contributions of an individual for the year starting 1 July 2012 until 30 June 2017. Employers’ SG liability will apply to all employees, including those aged 75 and over, from 1 July 2013. LISC is a government super payment of up to $500 per financial year to help low income earners save for their retirement. The LISC is 15% of the concessional (before tax) contributions you or your employer makes from 1 July 2013. The maximum payment you can receive for a financial year is $500 and the minimum is $10.

For further information about eligibility and how to apply for LISC, please refer to the Australian Tax Office (ATO) website.

Superannuation (often called Super) is money saved during your working life for retirement.

Salary Sacrifice

Salary Sacrifice contributions are arranged through your employer (an agreement in writing) to have a part of your future income paid directly to your super account, before any payroll tax has been applied. For tax purposes, this is known as a concessional contribution.

Like SG contributions, salary sacrifice contributions are subject to contributions tax, generally at the rate of 15%. Kinetic Super deducts this tax when a contribution is deposited into your account.

Concessional contributions are subject to annual caps (limits) with additional ‘excess contributions tax’ applying if these caps are exceeded.

For the 2016/17 financial year, the concessional contribution cap will be $30,000 for individuals aged under 50 and $35,000 for individuals aged 50 or over in that financial year. Amounts paid to super which are above concessional contribution limits will result in an excess contributions charge, which will be determined and notified to you by the ATO.

If we don’t have your Tax File Number (TFN), additional tax may be applicable. Ensure Kinetic Super has your TFN.

See more information on Salary Sacrifice below:

 

How much salary can be sacrificed?

There is generally no limit to the amount of salary that you can sacrifice, as long as there is no limitations in the applicable industrial law, award or similar agreement. However salary sacrifice contributions count towards your concessional contributions and if you pay an amount over the concessional contributions limit this will result in excess contributions tax being payable. See ato.gov.au for further details.

Is salary sacrifice right for me?

Any benefits of sacrificing salary for superannuation will depend on your personal circumstances, including income and tax rates. Before deciding to salary sacrifice, you should consider carefully all the facts and decide whether a salary sacrifice arrangement for super is right for you.

What rules apply to a salary sacrifice arrangement?

  • A contract of employment, including details of remuneration and any salary sacrifice arrangement, between you and your employer must exist prior to work being performed. It is advisable that all the terms of the arrangement, including its effect on SG contributions, are clearly documented.
     
  • The salary sacrifice arrangement must be entered into before you become entitled to be paid. Subject to the terms of any contract of employment, industrial agreement or award, employees can renegotiate a salary sacrifice arrangement at any time.
     
  • The sacrificed future salary must be permanently foregone for the period of the arrangement. Any benefit entitlements paid in cash form part of normal salary or wages. This includes deposits made by employers into employees’ bank accounts.


Salary sacrifice contributions:

  • Must be made to a complying super fund
  • Incur 15% contributions tax when received by the fund (as no income tax has been paid on them)
  • Are preserved
  • Do not qualify for the Government co-contribution.

Making salary sacrifice super contributions

Speak to your employer or payroll officer about the salary sacrifice options available to you and any impact on your super contributions.

To assist you Kinetic Super has a Contributions Calculator

Personal after-tax contributions

Personal after-tax contributions (also known as member voluntary) are additional contributions paid to your super account.

They are non-concessional and aren’t taxed within the super system because income tax has already been applied.

Other non-concessional contributions include:

  • some amounts you transfer from overseas funds (if applicable)
  • excess concessional contributions
  • spouse contributions.

Non-concessional contribution limits

If you’re under age 65 on the first day of the financial year and you want to contribute a one-off payment, you have the option to bring forward two years of non- concessional contributions. See the examples below for details.

After you contribute the maximum amount, you may be unable to make further payments. Alternatively, if you are under your bring-forward contribution cap, you may only be able to make reduced payments for the next two years. The maximum you can contribute over a three-year period is $540,000.

If you are over age 65, the maximum lump sum you can make per year is $180,000 (subject to Work
Test requirements).

If you exceed these limits, the excess will be taxed at the top marginal personal tax rate of 49% including Medicare Levy of 2% and the Temporary Budget Repair Levy of 2%. The Fund may not accept excess contributions above the cap.

Non-concessional contribution limit* examples (assuming eligibility criteria is met)

Contributions in 2015/2016 2016/2017 2017/2018 2018/2019
Example 1 $540,000 - - $180,000
Example 2 $540,000 - - $540,000
Example 3 $200,000 $100,000 $100,000 $180,000
Example 4 $200,000 $200,000 $140,000 $540,000
Example 5 $300,000 $240,000 - $180,000

The 2013/2014 non-concessional contributions cap was $150,000. Where a bring-forward has been triggered in 2013/2014 financial year, your bring-forward cap for the three years will be $450,000, even though the non-concessional contributions cap changed to $180,000 from the 2014/2015 financial year.

* Please note that the Government (in their Federal Budget 2016) have proposed a lifetime cap of $500,000 on the amount of non-concessional contributions. If this is passed into law, it will be effective at the time of the announcement (7.30pm AEST on 3 May 2016) and will replace the current arrangements, which allow individuals to make non- concessional contributions of up to $180,000 per year (or $540,000 every three years if aged under 65). See budget.gov.au for more information.

The government co-contribution scheme

The co-contribution is a Government initiative to assist eligible individuals to save for their retirement. If you are eligible and make personal contributions to your superannuation fund, the Government will match your contributions ($0.50c for each dollar contributed up to the maximum level) with a super co-contribution. The amount of co-contribution you may receive is determined by your income and the amount of your own personal after-tax contributions. Income must be below a maximum threshold to qualify.

See more information on the government co-contribution scheme below:

 

Am I eligible?

You may be eligible for the Government super co-contribution if you meet the following conditions:

Income for co-contribution purposes is the total of your assessable income, your reportable fringe benefits and your reportable employer super contributions. This may be different to your taxable income.

  • You make personal (after-tax) super contributions to a complying super fund by 30 June each year (not salary sacrifice contributions or contributions for which you claim a tax deduction).
  • Your total income is less than the upper income threshold ($51,021 for the 2016/2017 financial year).
  • 10% or more of your total income is from eligible employment and/or running a business.
  • You’re not a temporary resident of Australia (unless you are a New Zealand citizen) or a holder of a prescribed visa.
  • You lodge an income tax return for the year of income.
  • You’re less than 71 years old at the end of the year of income.

How much might I receive?

The maximum co-contribution of $500 will apply if you have an income of $36,021 (the 2016/2017 lower income threshold) or less and have a made a personal contribution of at least $1,000.

The co-contribution cuts out when your income reaches the upper threshold ($51,021 for the 2016/2017 financial year). If your co-contribution entitlement is greater than $0 and less than $20 the Government will pay the minimum amount of $20.

Can I choose which super fund the co-contribution is paid into?

The co-contribution will generally be paid directly into the same super account that you paid your personal super contribution, providing that fund will accept the co-contribution. If you wish to have your co- contribution paid into a particular super fund, you can complete the Australian Taxation Office (ATO) Superannuation Fund Nomination form or phone the ATO on 13 10 20.

How will I know that I have received the co-contribution?

The ATO will send you a letter with details about your co-contribution after it has been paid to your Kinetic Super account. The co-contribution will appear on your next statement. You can also view account information via Member Online Services.

How do I make personal contributions to Kinetic Super?

We make it easy for you to make personal contributions:

  • One off contribution – you can make a member voluntary contribution at any time by cheque, BPAY® or direct credit.
  • Regular contributions – can be set up as a direct debit by completing the Member Voluntary Contribution form, on request by calling 1300 304 000 or via Member Online Services.
  • Payroll deduction – you can arrange for your employer to regularly deduct an agreed amount from your after-tax pay and send it to Kinetic Super.

For further information on super contributions, refer to the ATO website.

Kinetic Superannuation Ltd (KSL) has engaged Industry Fund Services Ltd (IFS) (ABN 54 007 016 195 AFSL 232514) to provide financial advice services in relation to KSL’s superannuation products. These financial services are provided by IFS under IFS’s Australian Financial Services License, not by KSL, and therefore KSL is not responsible for the services.

Member Education & Advice Consultants are employed by KSL and are Authorised Representatives of IFS. This information is of a general nature only and does not take into account your personal objectives, financial situation or needs. Before making a decision about Kinetic Super or Kinetic Smart Pension you should obtain and consider the relevant Product Disclosure Statement (PDS) for these products, and any Incorporated Information, and also consider your personal circumstances. For a copy of the PDS, call us on 1300 304 000 or visit the Kinetic Super website, kineticsuper.com.au.

Definition of spouse

A Spouse is defined as someone you are either legally married to or in a de facto relationship with. This can be someone of the same or of a different sex.

See more information on definition of spouse below:

 

Tax offset for spouse contributions

Either you or your partner may be entitled to claim a tax offset up to a maximum of $540 per year for contributions made on behalf of their non-working or low-income spouse, if their assessable income (reportable fringe benefits and reportable employee super contributions) is less than $13,800 a year.

The offset is calculated as 18% of the contributions made to a complying super fund, up to a maximum contribution limit of $3,000 p.a. The offset reduces gradually as the spouse’s income increases above $10,800 and will completely phase out where the spouse’s assessable income is $13,800 or more.

Who is eligible for the offset?

The offset is available if you are an Australian resident and tax payer making after-tax contributions
on behalf of your low-income or non-working resident spouse. The assessable income of the spouse must be within the above ranges and the offset does not apply if you are entitled to a deduction for the contributions as the employer of the spouse.

Is there a limit on spouse contributions?

Spouse contributions count towards the receiving spouse’s non-concessional contribution cap. There is, also, a limit on the contributions for which an offset can be claimed.

How are spouse contributions treated for taxation purposes?

Eligible spouse contributions are:

  • Non-concessional (after-tax) contributions
  • Tax-free when eligible to be withdrawn on or before retirement subject to the low rate cash threshold, and are counted towards the receiving spouse’s contribution limit.

We can’t accept spouse contributions unless your spouse has supplied their TFN to us. The contributing spouse needs to claim the tax offset through their tax return. It is not an automatic process.

Non-concessional (after tax) contributions are not subject to contributions tax. However non- concessional contributions are limited to $180,000 per year or $540,000 over 3 years for people under 65 years of age. Contributions above these limits will be taxed at the top marginal rate of 49% (which includes the Medicare Levy of 2% and the Temporary Budget Repair Levy of 2%).

If your spouse is between the age of 65 and 70, they must have worked 40 hours for 30 consecutive days
to be able to accept the payment. All personal contributions made by an eligible spouse are treated as non-concessional contributions and must be preserved until they reach preservation age or retirement.

How to make a spouse contribution?

If you would like to make a spouse contribution, please complete and return the Spouse Contribution form or on request by calling 1300 304 000.

 

What is contribution splitting

Contributions splitting is when you rollover a portion of your recent concessional (before-tax) contributions to your spouse’s complying super fund.

You can apply to split contributions regardless of your own age, but your spouse must be either:

  • Less than 55 years old; or
  • 55 to 64 years old and not retired.

 

 

What contributions can be split?

You can split the lesser of:

  • 85% of any employer contributions (which includes Superannuation Guaranteed and salary sacrifice contributions; plus any personal contributions you have made for which you have advised the Fund that you have claimed a tax deduction for (generally for self-employed people); and
  • The concessional contributions cap for 2014/15 is $30,000 for anyone aged under 49 years as at 30 June 2014 and $35,000 for anyone aged 49 years or over as at 30 June 2014.
     

The following table provides details of what can and can’t be split.

Splittable Contributions Non-Splittable Contributions
Employer contributions Personal contributions that you can’t claim a deduction for (employees can’t claim this deduction)
Salary sacrifice contributions Contributions you make a CGT cap election for small business or with a personal injury election
Personal contributions that you claim a deduction for (self-employed people may be able to claim this deduction) Directed termination payments
  Transfers from foreign funds
  Contributions made by your spouse to your super
 

Why do people split their contributions?

Whilst split contributions remain preserved until the receiving spouse meets a condition of release, you may wish to split your contributions because:

  • Your spouse is older than you and may be able to access super benefits earlier than you can, or
  • If both you and your spouse wish to retire between the age of 55 and 59 and you wish to maximise the benefits that you can receive tax free, or
  • Your spouse is younger than you and transferring contributions may enable you to qualify for a higher age pension under the Centrelink/ Department of Veteran’s Affairs assets test.

Spouses are defined as someone you are either legally married to or in a de facto relationship with. This can be someone of the same or of a different sex.

Contribution splitting

Contribution splitting does not reduce what must be counted towards your concessional cap. The Fund reports to the ATO all contributions that were made for you, including any contributions that were later transferred to your spouse after a contributions splitting application.

When can you split your contributions?

You have until 30 June each year to request a split of concessional contributions that were made in the previous financial year. For example you must apply by 30 June 2015 to split contributions made to the Fund for the period of 1 July 2013 to 30 June 2014.

If you’re transferring your money out of the Fund during the year, you can request to split contributions that have been paid into the Fund since the previous 1 July. The split will be processed before any other payment is made. No splits will be processed once your account is closed.

Cost and rules on the amount

The member requesting the contribution split must maintain a minimum fund account balance of $1,500 after the split.

Members may make only one split request each financial year and cannot specify from which investment option it is to be made. The amount to be split will be drawn down from existing investment account balances on a proportional basis. A withdrawal fee of $50 applies to each contribution split processed.

How to make a contribution split to the superannuation account of your spouse?

To split the contribution to the superannuation account of your spouse, you will need to complete and return the Contribution Splitting form or on request by calling 1300 304 000 and provide the appropriate proof of identity.

How do I make extra contributions

Make extra personal contributions to your account through:

  • Member Online Services - for a once off payment or set up a regular direct debit
  • Payroll deduction agreement with your employer.

Curious to know how adding $10, $30, or $50 extra a week to your super might mean in retirement? Try our Contributions calculator.

You can also make salary sacrifice and spouse contributions.