Contributing to superannuation is often the most effective way to accumulate assets for your retirement. Superannuation is a concessionally taxed environment that also offers an element of asset protection.
The retirement planning process may identify it is appropriate to make additional contributions to superannuation. Your Politis Investment Strategies Financial Planner can determine how much should be contributed and whether the contributions should be made as concessional or non concessional contributions.
Concessional contributions are “pre-tax” contributions and are made up of compulsory employer contributions, salary sacrificed contributions, and personal tax deductible contributions. These contributions have an annual limit which depends on your age. Concessional contributions can be used to reduce your overall level of tax payable as they are taxed at the rate of 15% in your superannuation fund, which may prove to be favourable when compared to your personal marginal tax rate.
Non concessional contributions are made from “post-tax” money, normally from a personal bank account. These contributions are not tax deductible and are not taxed at 15%.
As there are limits on each type of contribution, careful planning is required to maximise your superannuation balance at retirement. The greater your balance in superannuation, the more benefit you will receive from the low rate or nil rate of tax the structure provides.