- 1. Supply TFN to your super fund
- 2. Combine your super accounts
- 3. Identify your dependants and non-dependants
- 4. Aspire to super success in 8 steps
- 5. Do a financial stocktake
- 6. Consider making concessional (before-tax) contributions
- 7. Consider making non-concessional (after-tax) contributions
- 8. If aged 65 or over, check that you meet the work test before contributing
- 9. Check eligibility for co-contribution
- 10. If necessary, consider talking to an independent adviser
Note: This article is current for the 2014/2015 financial year.
Near the start of each financial year, SuperGuide publishes an updated super checklist for beginner readers. More advanced checklists will follow in coming months. Use this list as a kick-start for your 2014/2015 super resolutions. You may not keep all of your resolutions, but if you do just a handful of the tasks listed in the checklist below, you can strengthen the chances of a financially secure retirement.
If you do nothing else…
1. Supply TFN to your super fund
Check that your super fund has your tax file number (TFN). If your super fund doesn’t have your TFN, your concessional (before-tax) contributions are hit with penalty tax, and you won’t be permitted to make non-concessional (after-tax) contributions. And as bad things happen in threes, you’ll also be excluded from the co-contribution scheme. For more information, see SuperGuide.com.au article Super for beginners, part 14: Save tax – Supply TFN to your super fund.
2. Combine your super accounts
Combining super accounts can save you thousands of dollars in fees, and if you don’t combine them quick-smart, the ATO may snuffle your member accounts under new compulsory transfer laws introduced from July 2013. If you’re not sure how many super funds you currently have, then locating these accounts and consolidating your super can add thousands of dollars to your retirement savings in an instant. For information on how to find your super accounts see SuperGuide articles Super in 3 steps: You’re probably richer than you think and Find lost super in 4 steps, and make quick cash.
3. Identify your dependants and non-dependants
Ensure that you have clear plans about what happens to your super benefits and non-super assets in the event of your death. Doing some planning now can save your family a lot of heartache, and possibly save thousands of dollars in tax. Identifying who receives your super benefits when you die (by ensuring you nominate your beneficiaries) becomes more important when you plan to leave your super benefits to a non-dependant for tax purposes, such as a financially independent adult child. For more information on your life expectancy, who can receive your super benefits when you die, and the tax treatment of those benefits, check out the following articles:
- Life expectancy: Will you outlive your retirement savings?
- Estate planning: Dear Dad, Tax for everything
- Estate planning: Beware the dastardly death tax
4. Aspire to super success in 8 steps
If your tolerance for ‘New Year’ super resolutions, or in this case, Spring super resolutions, has already reached its limit, then the SuperGuide article 8 steps to super success provides a quick overview of what I believe is the bare minimum for anyone hoping for a reasonable superannuation balance on retirement: for example, check fees, investment performance and life insurance.
Now, for some more super-boosting strategies…
5. Do a financial stocktake
The first step is to work out when you plan to retire and what type of income you want to have in retirement. You can then calculate how much money is necessary to finance your preferred retirement income from the age you retire until the day you die (or beyond if you have dependants you want to look after). Work out how much super and other savings you have now and what type of cash you will have if you continue your current savings strategy. If there is a gap between how much you’ll have and how much you want then you have even greater motivation to make the most of the super rules. Alternatively, if you have substantial assets sitting outside the super system you may want to consider shifting some or all of your super assets within the super environment. For more information, check out our special section How much super do I need?, or alternatively, as a starting point, check out the following articles:
- A comfortable retirement: how much super is enough?
- Setting a retirement target: Living on more than $58,000 a year
Note: The two articles above are updated every six months in line with lifestyle cost increases and Age Pension. The next update for the two articles above will be in November 2014.
6. Consider making concessional (before-tax) contributions
The level of income you earn will generally determine whether you make after-tax or before-tax contributions. If you pay more than 15 cents in the dollar tax, then super starts looking attractive from a tax saving point of view. You may also be interested in making before-tax contributions if you want to offset a large capital gains tax bill.
For information on concessional contributions check out the following SuperGuide article: Super concessional contributions: 2014/2015 survival guide.
Warning: Anyone considering making further super contributions, or anyone on a high income, needs to be mindful of the contributions caps. If you exceed the concessional contributions cap, expect to be hit with penalty tax, or the opportunity to withdraw your excess contributions and be taxed at your marginal tax rate. NOW is the time to check the level of super contributions that you make, or are made on your behalf by your employer, to ensure that you don’t exceed the contributions cap inadvertently. Since 1 July 2012, if your adjusted taxable income is greater than $300,000 a year, your concessional contributions are hit with an extra 15% of tax, which means concessional contributions of very high income-earners are hit with 30% tax.
7. Consider making non-concessional (after-tax) contributions
The annual non-concessional contributions cap is $180,000 for the 2014/2015 year. If you’re under the age of 65, you can bring forward up to two years’ worth of non-concessional contributions. For more information check out the following articles:
- Your 2014/2015 guide to non-concessional (after-tax) contributions
- Turning 65: Maxing out your after-tax contributions cap
Note: If you are a small business owner you may be eligible for a $1.355 million after-tax contribution limit for the 2014/2015 year (indexed), which is lifetime contribution limit, in addition to the non-concessional contributions cap. The CGT exemption permits personal contributions resulting from the disposal of qualifying small business assets. If you believe that you may be eligible then seek independent advice because the rules that apply to this exemption are complicated.
8. If aged 65 or over, check that you meet the work test before contributing
Anyone under the age of 65 can make super contributions regardless of whether they are working. If an individual is aged 65 or over, then he or she must work 40 hours in a 30-day period during the financial year in which they plan to make the contribution. For more information, check out the following articles:
- For over-65s: Ten super tips when making contributions
- I’m retired. Can I make super contributions?
- Turning 65: Maxing out the after-tax contributions cap
9. Check eligibility for co-contribution
The co-contribution is a tax-free super contribution from the Federal Government when you make a non-concessional (after-tax) contribution. For more information check out the following articles:
- Cashing in on the co-contribution rules (2014/2015 year)
- Salary sacrificing will not increase co-contribution entitlement
If you’re willing to spend some money…
10. If necessary, consider talking to an independent adviser
If you’re making major financial decisions, particularly decisions with significant tax implications, then consider seeking independent tax from an accountant or, if you’re planning to embark on major financial strategies involving investments, perhaps a financial adviser. If you do plan to use a financial adviser, then ensure the one you choose understands the super rules and charges a fee for advice. Independent advisers are difficult to find, but not impossible. For more information, check out the following articles:
- Retirement planning: How much should I pay for financial advice?
- How many financial advisers operate in Australia?
- Financial advice: Only 43 independent financial advisers in Australia