Friday, 31 March 2023
7:00pm – 8:30pm
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What is Super and why should you worry about it as a parent?
Superannuation, also known as Super, is a tax structure set up by the Government of Australia to help families save for their retirement savings. It was mandated in 1992 to ensure that people could enjoy a dignified and comfortable retirement without being dependent on the government.
Super is simply a tax structure set up by the Government to ensure people & families save for their retirement appropriately with the incentive being that you pay lower tax. That’s Superannuation in a nutshell. There are two phases of Superannuation, accumulating & then spending. There are specific rules around Super, so I won’t bore you with too many, but here are the main items:
·Superannuation contributions are taxed at 15% from Employer Contributions & Salary Sacrifice. ·As of the 2022 / 2023 financial year, you can contribute $27,500 of the above Concessional Contributions per year.
·You can contribute after tax money, which is known as a Non-Concessional Contribution of up to $110,000 per year.
·At age 60 & if you decide to fully retire from work, you can commence a Superannuation Pension where you pay 0% tax on income payments & Capital Gains Events.
As previously mentioned, Superannuation is simply a tax structure that helps Australian families save for their retirement with the Government incentivising this by minimising Tax. Who doesn’t love paying less tax?
So why should parents care about Superannuation? Superannuation could well be your largest or second largest asset behind the family home if you take care of some simple details early on. The main areas of Super you need to be aware of are:
·Platform / Administration Fees
·Investment Management Costs
·Asset Allocation (The split of Growth vs Defensive Investments)
For instance, if either parent goes on maternity leave & there are no Super contributions received for a period of 16 months, your insurances may cancel. By making an after tax contribution to Super, you could be eligible for a Government Co-Contribution (Free money from the Government, what could be better) as well as keeping your account active & insurance open.
By minimising costs, assessing your volatility tolerance (risk profile) for Growth assets (Businesses & Bricks or Shares & Property) versus Defensive assets (Cash, Term Deposits, Bonds, Fixed Interest) & having the appropriate insurance cover for Death, Disability, Injury or Illness so you aren’t paying more than you need. This is key in allowing your Retirement Nest Egg (Super), to grow over a 20 year, potentially 30 year period in a tax effective & efficient environment.
You can log into your MyGov account to see what Super funds you have and do a comparison with the provided calculators. You should check that if you have multiple Super funds, what insurance cover you have, then try to have one (1) super fund only to minimise costs. I think that is all you need to know about Super for now. But there is so much more that we will discuss about Super later.