Boost your wealth before the rules change, writes Nicole Pedersen-McKinnon.
The race is on to the end of the financial year - and this year it's more important than ever you compete. The prizemoney, particularly when it comes to your retirement kitty, is huge.
Your super has been battered on two fronts: from merciless investment markets and mercenary governments. The former have left our balances seriously depleted the latter, thanks to clawback after clawback, has seriously curtailed our ability to rebuild them.
But all is not lost. Do a few simple things before the clock ticks over to midnight on Friday, June 29, and you'll save and make the most money possible.
This involves the government's shock decision to defer, for two years, a permanent increase in the amount fiftysomethings with less than $500,000 in super can contribute pre-tax. The word "defer" masks the fact this beleaguered group - who have probably only recently been able to focus on retirement saving and for whom the credit crack-up came at the worst time - is about to see allowable contributions unexpectedly halve from $50,000 to $25,000.
Do all that you can to mop up the double limit this year. Talk to your employer immediately about sacrificing your last pay cheque for the year or any potential bonus. This can reduce your tax by up to 31.5 per cent (with Medicare). Remember when crunching the numbers, though, that these so-called concessional contributions include what your employer pays in on your behalf, and there are penalties for breaching the cap.
Make a co-contribution. Those earning less than $61,920 a year who pay in $1000 after tax will qualify for bonus money from the government. It will match that contribution for people on less than $31,920, with the amount phasing down by 3.3? for each dollar earned over that salary. This is yet another measure set to be scaled back next year with the maximum co-contribution falling to $500, and the maximum salary to $46,920.
Look after your spouse. If they earn less than $13,800, you can pay in an after-tax $3000 to their super to receive a tax offset of $540. Many are overlooking this opportunity with only 16,000 claims in 2009-10, the Association of Superannuation Funds of Australia says. Find more about this and the strategy above at ato.gov.au.
Find lost money. There is $730 million lying unclaimed in 2.3 million super accounts. If you've had multiple jobs or addresses, the chances are some of it could be yours. Search on SuperSeeker on the ATO's website - you'll need your tax file number - to find out.
THE YEAR AHEAD
After June 30 you need to review the situation, too.
Check your contributions to make sure you won't go above the stringent new concessional contribution limit of $25,000, or risk a big tax penalty. Don't forget this figure includes employer contributions - you may even have more than one employer paying in on your behalf - and your own salary sacrifice payments. It will remain the cap until at least July 2014, when the government says a higher limit will be reinstated for fiftysomethings with less than $500,000. We shall see.
This new limit means those using a transition-to-retirement strategy, where you draw a pension to sacrifice your salary into super and significantly lower your tax, will need review. The lower cap may wipe out some or all of your advantage.
Those further from retirement can no longer leave super until the last minute. As I revealed in a recent column, you need to start sheltering the full $25,000 in super from age 35 to reach the magic million-dollar mark. Otherwise, you can consider after-tax contributions, which will obviously cost you more, or tax-effective alternatives to super (such as negative gearing, bearing in mind it's a much higher risk).
Be aware the introduction of the low income super contribution means an automatic tax refund into your super fund of up to $500 if you earn less than $37,000.
Lucky you if this applies but the contributions tax for those with income above $300,000 (including salary, adjusted fringe benefits, tax-free pensions and total net investment loss) will double from 15 per cent to 30 per cent. This is still below the 45 per cent marginal tax rate.
Meanwhile, you have just two weeks to take advantage of this year's giveaways and boost your ultimate super stash.