Australia’s population is aging. In the thirty years between 1970 and the turn of the millennium, the percentage of Australia’s population aged 65 years and above grew from 8% to 13%. Across the same period, the proportion of Australia’s population aged 15 or younger dropped 9 percentage points to 22%.
This underlines why the need for widespread investment in superannuation funds is so great. As life expectancy continues to increase, Australia’s retirees are going to need the additional support such funds provide.
So what is the government doing to incentivise this investment? How are the powers that be encouraging small investors to put money into their supers?
Tax Implications for Supers
Investors are able to make concessional contributions to their super, up to a point, each financial year. For the financial year of 2016 to 2017, these concessional contributions are capped at $30,000 for investors aged under 49, and at $35,000 for anyone aged 49 and above.
Concessional contributions can include employer contributions, salary sacrifice contributions and tax-deductable contributions. These contributions will not be subject to additional tax provided the cap is not exceeded during the financial year. The waived tax on these contributions – up to the cap – is designed to encourage investment in supers across Australian society, safeguarding the future of the investor and securing a comfortable retirement.
If the cap is exceeded, additional charges will be levied against the payments, and the contribution will be taxed at the marginal rate.
There are other measures that the government has taken to encourage investment, particularly for smaller-scale, low income investors. If an investor’s income is below the government’s threshold for any given year, they may be eligible for government co-contributions to their super fund.
In order to receive the government co-contribution, the investor must first make a personal contribution up to the amount outlined by governmental guidelines, based upon their income bracket. When this contribution is made, the government will fulfil their duties by adding an additional contribution, up to a maximum value. This maximum value will also be defined by the income bracket of the individual investor.
There is no need to submit a claim for this contribution. It will be automatically forwarded to the superannuation account once the criteria are met. This gives small investors a helpful boost as they prepare their super for the future, and also encourages higher levels of investment.
General advice warning:
This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information, so please consult your financial adviser.