The lead up to 30 June can be a good time to maximise tax benefits that may be available to you inside super.
If you’re keen on taking advantage of potential tax benefits available inside super, or are looking at ways to rebuild your retirement savings (for instance, you may have made a withdrawal as part of the early release of super scheme), the lead up to 30 June could be a good time to act.
Certain contributions, which we explore below, may have the ability to reduce your taxable income, or see you pay less on investment earnings, but remember there will be things to consider.
Contributions that could create tax benefits
Tax-deductible super contributions
You may be able to claim a tax deduction on after-tax super contributions you’ve made, or make, before 30 June this year.
To claim a tax deduction on these contributions, you’ll need to tell your super fund by filing out a notice of intent. You’ll generally need to lodge this notice and have the lodgement acknowledged by your fund, before you file a tax return for the year you made the contributions.
Putting money into super and claiming it as a tax deduction may be of particular benefit if you receive some extra income that you’d otherwise pay tax on at your personal income tax rate (as this is often higher).
Similarly, if you’ve sold an asset that you have to pay capital gains tax on, you may decide to contribute some or all of that money into super, so you can claim it as a tax deduction. This could reduce or even eliminate the capital gains tax that’s owing altogether.
Click here for more information.
Government co-contributions
If you’re a low to middle-income earner and have made (or decide to make before 1 July 2022) an after-tax contribution to your super fund, which you don’t claim a tax deduction for, you might be eligible for a government co-contribution of up to $500.
If your total income is equal to or less than $41,112 in the 2021/22 financial year and you make after-tax contributions of $1,000 to your super fund, you’ll receive the maximum co-contribution of $500.
If your total income is between $41,112 and $54,837 in the 2021/22 financial year, your maximum entitlement will reduce progressively as your income rises.
If your income is equal to or greater than the higher income threshold $54,837 in the 2021/22 financial year, you will not receive any co-contribution.
Spouse contributions
If you’re earning more than your partner and would like to top up their retirement savings, or vice versa, you may want to think about making spouse contributions.
If eligible, you can generally make a contribution to your spouse’s super fund and claim an 18% tax offset on up to $3,000 through your tax return.
To be eligible for the maximum tax offset, which works out to be $540, you need to contribute a minimum of $3,000 and your partner’s annual income needs to be $37,000 or less.
If their income exceeds $37,000, you’re still eligible for a partial offset. However, once their income reaches $40,000, you’ll no longer be eligible, but can still make contributions on their behalf.
Salary sacrifice contributions
Salary sacrifice is where you choose to have some of your before-tax income paid into your super by your employer on top of what they might pay you under the superannuation guarantee.
Salary sacrifice contributions (like tax deductible contributions) are a type of concessional contribution and these are usually taxed at 15% (or 30% if your total income exceeds $250,000), which for most, means you’ll generally pay less tax on your super contributions than you do on your income.
Contributions after 65
Effective 1 July 2022, if you’re aged between 67-74, you won’t need to satisfy the ‘work test’ before making non-concessional contributions and salary sacrifice contributions to your superannuation.
If you’re under age 75, you can make voluntary personal contribution regardless of your employment status.
Click here for more information.
Insurance through super
Superannuation tax concessions can make it more tax effective to pay for insurance premiums from superannuation, rather than purchasing insurance outside of superannuation. Premiums paid via superannuation does not affect your back pocket. It does reduce the superannuation account.
Click here for more information.
Further information
For further information about these strategies and how you may benefit please contact me at (03) 9886 0623 or email: paul@mentorfs.com.au.
To help you complete your tax return, especially if you’ve been working from home, this checklist outlines income and expenses you need to disclose to the Australian Taxation Office (ATO) when lodging your return. We’ve also provided an overview of the types of tax offsets and deductions you may be entitled to claim plus other handy tax tips.
Income
- Gross salary, wages, earnings, allowances, benefits, tips and directors’ fees as shown on the pay as you go (PAYG) payment summary supplied by your employer.
- Lump sum and termination payments as per the PAYG payment summary supplied by your employer.
- Annuities or other pensions, such as account-based pensions, as per PAYG payment summary or statements provided by your financial institution or super fund.
- Taxable Government allowances or pensions, such as the JobSeeker Payment, Youth Allowance and Age Pension.
- Interest earned as shown on your bank, mutual bank or credit union statements.
- Dividends received or reinvested, including any franking credits attached as shown on the dividend statements provided by the company.
- Distributions from partnerships and trusts, including managed funds, as shown on the distribution statement provided by the partnership or trust.
- Details of any capital gains or losses incurred from the sale of (or other dealings involving) capital gains tax (CGT) assets, such as shares and property. This includes dates and values of acquisitions and disposals, as shown on purchase and sale documents.
- Rent received from investment properties as shown on real estate agent statements or your personal records.
- Details of any foreign source income (including overseas pensions) earned or received, foreign assets held and any foreign taxes paid.
Expenses
Work-related expenses that have not been reimbursed by your employer
- Deductible work from home (WFH) expenses not reimbursed by your employer. For more information please see page 2.
- Motor vehicle expense details for work-related travel in a personal vehicle, including the work-related kilometres travelled. This excludes travel to and from work.
- Other work-related travel expenses, such as taxis, public transport and bridge tolls.
- Purchase of compulsory uniforms, protective clothing and laundry costs for work-related purposes.
- Self-education expenses, including fees, books, stationery, travel and parking.
- Union fees and memberships to industry and professional organisations.
- Purchase of sun protection, hats, sunglasses and sunscreen if you need sun protection at work.
- Purchase of tools of trade or equipment for work-related purposes.
- Telephone accounts for work-related calls.
- If you are paid an overtime meal allowance under an award, you can claim up to the reasonable allowance expense amount set out by the ATO.
- Attendance fees and travel for work-related seminars, conferences and conventions.
- Books, journals, subscriptions and your professional library expenses.
- Home office set-up expenses such as depreciation on purchase of equipment, including computers, telephones and furniture. Details of home office running expenses such as heating, cooling, lighting and cleaning.
Investment-related expenses
- Telephone accounts for investment-related calls.
- Attendance fees and travel for investment seminars, conferences and conventions.
- Interest paid and fees charged on money borrowed for investments, such as shares.
- Bank fees incurred on investment-related activities and accounts.
- Property rental expenses, including advertising, council and water rates, insurance, interest on loans, real estate management fees, repairs and maintenance, lease preparation, depreciation and capital works (such as buildings and structural improvements) deductions. Please note, from 1 July 2017, travel expenses relating to inspecting, maintaining, or collecting rent for a residential rental property cannot be claimed as a deduction.
General expenses
- Donations of $2 or more to registered charities.
- Tax preparation fees, including travel to your tax agent.
Tax off sets and deductions
You may be entitled to the following tax off sets (rebates) and deductions for the year ended 30 June 2022.
Deductions for expenses related to working from home due to the COVID-19 pandemic
If you are working from home and incur expenses that are not reimbursed by your employer, you may be able to claim them as a tax deduction. The expenses must be directly related to working from home and you need to keep a record of your working from home hours and your expenses. There are three ways you can choose to calculate additional running expenses:
Shortcut method – A deduction of $0.80 for each hour worked from home is allowed if you incur additional deductible running expenses as a result of working from home. This shortcut method is only available from 1 March 2022 to 30 June 2022.
Fixed rate method – allows:
- a rate of $0.52 per hour for the cost of utilities, cleaning and depreciation of office furniture
- work-related phone and internet expenses, computer consumables and stationery
- work-related depreciation of a computer, laptop or similar device
Actual cost method – claim the actual work-related portion of all running expenses, calculated on a reasonable basis.
For more details, please refer to the ATO website under ‘employees working from home’.
Deductions if your home is not your principal place of business
Deductions you may be able to claim
You do have a work area
You don’t have a work area
Cost of using a room’s utilities such as gas and electricity
Yes
Yes
Work-related phone costs
Yes
Yes
Decline in value (depreciation) of office equipment such as desks, chairs and computers
Yes
Yes
Decline in value (depreciation) of curtains, carpets and light fittings
Yes
No
Occupancy expenses such as rent, mortgage interest, insurance and rates
No
No
Source ATO: https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Working-from-home-expenses/
Private health insurance offset
Depending on your income and age, you may be eligible for a tax off set of up to 32.8% on your health insurance.
If you haven’t claimed a reduced premium from your health fund, then you can claim an off set in your tax return.
Spouse super contribution offset
If you made personal superannuation contributions on behalf of a spouse, there is a tax off set of up to $540 per year. This is available for spouse contributions of up to $3,000 per year, where your spouse earns less than $37,000 per year, and a partial tax off set for spousal income up to $40,000 per year.
Senior Australians pensioner tax offset
If you are eligible for the senior Australians pensioner tax off set (SAPTO) you are able to earn more income before you have to pay tax and the Medicare levy.
Super tax hints
Super is a tax-effective way to save for retirement. The following section contains some tips to help you maximise your super.
Contribution limits
For the 2021/22 financial year the maximum non-concessional (or after-tax) super contributions are capped at $110,000 per person per year or up to $330,000 over three years using the bring-forward provisions.
The ability to make non-concessional contributions and take advantage of the three year bring-forward provision is subject to your total super balance as at 30 June of the previous financial year, your age and whether you have satisfied the work test (if between ages 67–74).
Concessional contributions, or those made with pre-tax money, are limited to $27,500 per person per year. Unused concessional contribution caps from the 2018/19 financial year and later years may be used for up to five financial years as long as your total superannuation balance on 30 June prior to the financial year of contribution is less than $500,000.
Please note, voluntary concessional contributions, such as salary sacrifice or personal deductible contributions, are subject to age restrictions and the work test and work test exemption (if between ages 67–74).
Salary sacrifice
A salary sacrifice strategy allows you to make contributions to super from your pre-tax salary. Your salary is then reduced by the amount you choose to sacrifice.
The benefits of this are two-fold: not only does your super balance increase, but this strategy could also reduce your taxable income and therefore the amount of tax you pay. Also, super contributions are concessionally taxed at just 15% (up to 30% for individuals with income over $250,000) instead of your marginal tax rate, which could be as high as 47%.
Personal deductible contributions
If you are eligible to contribute to super, you may make voluntary personal contributions and claim a tax deduction up to your concessional contribution cap.
This gives you greater flexibility to top up your concessional contributions made by your employer, especially if your employer does not offer salary sacrifice.
For example, you can time your final contributions leading up to 30 June each year and make the most of your concessional contribution limits and the resulting tax benefits.
Super co-contributions
If you receive at least 10% of your income from employment or self-employment and you earn less than $41,112, you may be eligible for the maximum super co-contribution of $500 from the Government for an after-tax contribution to super of $1,000. The co-contribution phases out once you earn $54,837 or more.
The ATO uses information on your income tax return and contribution information from your super fund to determine your eligibility.
Super splitting
If you want to split your super contributions with your spouse, this can usually only be done in the year after the contributions were made. Therefore, from 1 July 2020, you may be able to split up to 85% of any concessional (or pre-tax) contributions you made during the 2020/2021 financial year with your spouse.
Apart from making the most of your super, there are other ways you can minimise your tax liability.
Capital gains and losses
A capital gain arising from the sale of an investment property or shares and capital losses can be used to off set the capital gains. For example, you may have sold investments that were no longer appropriate for your circumstances and any capital losses realised as a result can be off set against any capital gains you have realised throughout the year. Unused losses can be carried forward to off set capital gains in future years.
Please seek financial advice before making changes to your investments.
Prepaying interest
If you have an investment loan you can arrange to prepay the interest on that loan for up to 12 months and claim a tax deduction in the same year the interest was prepaid.
Negative gearing
Negative gearing is another strategy used to manage tax liabilities. Geared investments use borrowed funds to enable a higher level of investment than would otherwise be possible. Negative gearing refers to the cost of borrowing exceeding the income generated by the investment.
This excess cost can reduce the tax you pay on other income. If you invest in shares, you may obtain imputation credits which can be used to further reduce the amount of tax you pay.
Income protection insurance
If you hold an income protection policy in your name, then any premium payments you make are tax deductible.
Resident tax rates for 2021-22
Note: Medicare levy of 2% will also apply where applicable.
Individual tax rates for the year-ended 30 June 2022
Up to $18,200
Nil
$18,201 to $45,000
19% of the portion over $18,200
$45,001 to $120,000
$5,092 + 32.5% of the portion over $45,000
$120,001 to $180,000
$29,467 + 37% of the portion over $120,000
Over $180,000
$51,667 + 45% of the portion over $180,000
Further information
For further information please contact me at (03) 9886 0623 or email: paul@mentorfs.com.au.
Source: IOOF
Claim a tax deduction for your personal contributions to super.
Personal deductible contributions
By making personal contributions to your super, you may be able to claim a tax deduction to reduce your tax liability.
What’s in it for me?
- Pay less tax by reducing your taxable income, while growing your retirement savings quicker.
- Retirees, employees, self-employed persons and homemakers can build wealth more effectively.
Who can this strategy work for?
This strategy is most suitable if you:
- want to reduce tax
- are eligible to contribute
How does it work?
A personal deductible contribution allows you to reduce your taxable income. The amount of the contribution claimed as a tax deduction is generally taxed at 15%1 (contributions tax) in the fund, instead of your marginal tax rate.
Typically, anyone under age 67 can make personal deductible contributions. A work test generally applies from age 67 and an upper age limit applies. However, employees may also make personal deductible contributions.
Contributions you claim as a tax deduction count as concessional contributions.
Concessional contributions
Concessional contributions are generally subject to 15%1 contributions tax in your super fund up to set limits. They generally include employer contributions such as Super Guarantee, salary sacrifice contributions and personal contributions for which a tax deduction has been claimed.
Concessional contributions caps
An annual cap on concessional contributions applies each financial year. The concessional contributions cap for the 2021/2022 financial year is $27,500, regardless of age, but if your total superannuation balance last 30 June 2021 was less than $500,000 your concessional cap may be higher.
If you exceed your concessional contributions cap the excess contributions are generally included in your assessable income and taxed at your marginal rate. You will receive a non-refundable tax offset equal to 15% of the excess contributions2.
Personal deductible contributions count as income for benefits and concessions such as:
- Selected tax offsets
- Family Tax Benefit (FTB) Part A & B
- Medicare levy surcharge (income threshold)
- Commonwealth Seniors Health Card
Case study – meet Helen
Helen is a 43 year old self-employed florist earning $45,000 p.a. and is also employed part-time as a teacher earning $30,000 of employment income. Her employer makes Superannuation Guarantee contributions
of $3,000 p.a. which count towards the concessional contributions cap ($27,500 for the 2021/2022 financial year). Her marginal tax rate is 34.5% (including Medicare levy).
During Helen’s annual review, her financial adviser recommends she should contribute more to super as she nears retirement. She advises Helen to make a $20,000 personal deductible contribution to super to increase
her retirement savings and to reduce her taxable income. Helen will be required to submit a valid ‘notice of intent to claim a tax deduction’ form.
The personal deductible contribution is subject to 15% contributions tax in the super fund, instead of her marginal tax rate of 34.5%. If we include the low income tax offset (LITO) and the low and middle income tax offset (LMITO), this results in a net tax saving of $4,075 (after income tax and 15% tax paid in super3). Helen also benefits by having her retirement savings grow in a low tax environment.
Tips and tricks
- After the end of the financial year, you will receive a letter from your super fund asking if you intend to claim a tax deduction for your personal contributions. Consult your financial adviser or tax consultant before making a decision.
- However if you start a pension, withdraw or rollover your money, don’t wait until the end of the financial year. You will need to notify your super fund that you intend to claim a tax deduction before you start a pension, withdraw or rollover your money.
- Ensure you have notified your super fund and provided the form that you intend to claim a tax deduction for personal contributions. You should receive acknowledgement of receipt of that notice from the fund before you complete your tax return, start a pension or withdraw or rollover money from the fund to which you made your personal contribution.
Further information
For further information please contact me at (03) 9886 0623 or email: paul@mentorfs.com.au.
Notes:
- An additional 15% tax may apply to certain concessional contributions if your income plus concessional contributions exceed $250,000 in the 2021/2022 financial year.
- Individuals can elect to withdraw up to 85% of their excess concessional contributions from their superannuation. Depending upon the amount effectively withdrawn, excess concessional contributions left in the super fund may also count towards the non-concessional contribution cap.
- Personal income tax and Medicare levy if no personal deductible contribution is made is $14,842. If the $20,000 personal deductible contribution is made personal income tax reduces to $7,767 and $3,000 contributions tax is paid in the super fund.
Source: IOOF
With Australians living longer, not everyone is ready to sign off from work and start retirement at 65.
If you plan to work a little longer and want to continue to contribute to your super to build your retirement nest egg, here’s some of the ways you still can.
Employer-paid contributions
If you’re between 65 and 74 and still working, the rules around employer-paid super contributions don’t change. Generally speaking, from 1 July 2022, you’re eligible to receive super from your employer if you are aged over 18. It doesn’t matter if your job is permanent, or casual.
The work test
Effective 1 July 2022, if you’re aged between 67-74, you won’t need to satisfy the ‘work test’ before making non-concessional contributions and salary sacrifice contributions to your superannuation. However, if you want to claim a tax deduction on your personal contribution, you’ll still need to satisfy the work test requirement.
Personal contributions
If you are under age 75, you can make voluntary personal contributions regardless of your employment status.
Are there limits on how much I can contribute into my super?
- The general concessional contributions cap is $27,500 per financial year for the 2021/22 and 2022/23 financial years. You may have a higher concessional cap by carrying forward your unused concessional cap amounts accrued from 1 July 2018 (for up to five financial years) and your total super balance was less than $500,000 at the end of the previous financial year.
- The concessional contributions cap includes employer-paid contributions, contributions made under a salary sacrifice arrangement, and any personal after-tax contributions that you have claimed a deduction on.
- The non-concessional contributions cap is $110,000 (or $330,000 under the bring forward rule) for the 2021/22 and 2022/23 financial years. If you are under age 75, you won’t need to meet the work test to be able to make non-concessional contributions, unless you are aged 67-74 and wish to claim a tax deduction^. Refer to ato.gov.au for eligibility criteria. Spouse contributions can only be made if you are gainfully employed*. Once you turn 75, spouse contributions can’t be made.
- If at 30 June in the previous financial year, your total superannuation balance is greater than or equal to $1.7 million, you won’t be able to make any non-concessional contributions to super.
Other contributions you can make
1. Concessional contributions
The general cap on concessional contributions is $27,500 for the 2021/22 and the 2022/23 financial years. You may have a higher concessional cap if you are eligible to carry forward unused concessional cap amounts.
From 1 July 2022, if you are under age 75, you can contribute to your superannuation out of your income, before tax is paid without needing to satisfy the ‘work test’. An example of this is salary sacrifice. Salary sacrifice is where you nominate a certain portion of your before-tax salary to be paid as an extra contribution to super rather than receiving the money in your take-home pay.
2. Non-concessional contributions
These include contributions to your superannuation you make from your income after you have paid tax on it, for which you have not claimed a tax deduction. Other contributions that are counted as non-concessional contributions include:
- contributions made by your spouse into your account; and
- concessional contributions made in excess of your concessional contributions cap (generally $27,500 for the 2021/22 and 2022/23 financial years) that are not released from super under the relevant release authority.
3. Government Co-contributions
The government may make a superannuation co-contribution to your superannuation account up to a maximum of $500 if you are a low or middle-income earner and make a personal after-tax contribution to your superannuation. For the 2021/22* financial year to be eligible, you must:
- Make an eligible personal (after-tax) super contribution during the financial year
- Earn less than $56,112 before tax
- Be less than 71 years old at the end of the financial year
- Have more than 10% of your total income come from employment related activities, carrying on a business or a combination of these
- Not hold a temporary visa at any point during the financial year (unless you are a New Zealand citizen, or it was a prescribed visa)
- Lodge your tax return for the financial year
- Have a total super balance less than the general transfer balance cap ($1.7 million for the 2021/22 financial year) at the end of 30 June of the previous financial year
- Have not contributed more than your non-concessional contribution cap.
*The 2022/2023 thresholds are yet to be confirmed.
4. Spouse contributions
If your spouse or partner is a low-income earner, he or she may be able to claim a tax offset of up to $540 under certain conditions if they make a non-concessional contribution to your superannuation. Alternatively, your spouse may be able to split their concessional contributions made during the financial year with you into your superannuation fund.
5. Downsizer
For some Australians, downsizing your family home can be a useful way to contribute a large sum into your super. From 1 July 2022, if you are aged 60 or over, you may be eligible to contribute up to $300,000 ($600,000 combined for a couple) from the proceeds of the sale of your principal residence to your superannuation as a downsizer contribution. Eligible downsizer contributions do not count towards your contribution caps – if you provide your super fund with the appropriate form before or at the time you make the contribution, nor will you need to meet rules around existing maximum total superannuation balances, the work test or maximum ages for contributions.
Are there limits on how much I can contribute into my super?
- The general concessional contributions cap is $27,500 per financial year for the 2020/21 and the 2022/23 financial years. You may have a higher concessional cap by carrying forward your unused concessional cap amounts accrued from 1 July 2018 (for up to five financial years) and your total super balance was less than $500,000 at the end of the previous financial year.
- The concessional contributions cap includes employer-paid contributions, contributions made under a salary sacrifice arrangement, and any personal after-tax contributions that you have claimed a deduction on.
- The non-concessional contributions cap is $110,000 (or $330,000 under the bring forward rule) for the 2020/21 and 2022/23 financial years.
- If at 30 June in the previous financial year, your total superannuation balance is greater than or equal to $1.7 million, you won’t be able to make any non-concessional contributions to super.
Further information
For further information please contact me at (03) 9886 0623 or email: paul@mentorfs.com.au.
Source: BT
Purchase insurance through your super and gain a tax benefit.
Insurance through super
Purchasing Life Insurance, Income Protection and Total and Permanent Disability (TPD) insurance through super may be tax effective and also provide you with peace of mind.
Superannuation tax concessions often make it more tax effective for you to pay for your insurance premiums with your superannuation, rather than purchasing insurance outside of superannuation. Also, as premiums are deducted from your superannuation account, insurance cover does not affect your back pocket. However, it will reduce your superannuation savings, so you should speak with your financial adviser to help decide if this is the right strategy for you.
What’s in it for me?
- In some cases you can effectively pay premiums from your pre-tax income.
- Premiums via group super plans are often cheaper because the super fund is buying the insurance ‘in bulk’.
- Your qualifying dependants can receive tax-free lump sum payments if you, the insured, pass away.
- You may be able to obtain cover without having a medical examination.
- You may qualify for a government co-contribution if you fund the cover by making after-tax contributions.
- You may be able to top up your stand-alone insurance policies (those you hold outside super) using the savings.
- Most importantly, you and your family will be looked after if you incur an unexpected life event.
- Tax free superannuation income stream payments to members aged 60 or over, dependants aged 60 or over, or dependants aged under 60 if the member died age 60 or over.
- 15% tax offset on a taxable component of a disability superannuation income stream for members under age 60; or death income stream where the member died under age 60 and the dependant is under age 60.
Who can this strategy work for?
Generally insurance through super may be suitable if you:
- want to save tax and pay premiums from your pre-tax income
- want your qualifying dependants to receive tax-free lump sums if you pass away, or
- have restricted cash flow and want to use your accumulated super balance to pay for premiums.
There may be additional tax on benefits paid out from super, additional complexities with certain types of cover and potentially reduced retirement savings. It is important to seek financial advice to ensure this strategy is right for you.
How does it work?
Insurance cover is provided through an insurance policy which is issued by a life insurance company. The trustee of the super fund is the owner of the insurance policy and therefore claims are paid into the super fund.
Depending on your circumstances, you can purchase insurance through a super fund with:
- your existing super savings
- super contributions, such as:
- your employer’s Super Guarantee contributions
- personal tax deductible contributions
- personal after-tax contributions
- contributions made by your spouse
- salary sacrifice contributions using your pre-tax income
Case study 1 – meet Tim
Tim is 37 years old and his salary is $150,000 p.a. He would like to establish life insurance cover for the benefit of his spouse, Anita, who is listed as the sole beneficiary.
Anita meets the requirements to receive a tax free lump sum payment in the event of Tim’s death.
Based on Tim’s personal details and the recommended sum insured, the annual premium for the required level of insurance cover is $1,200.
Let’s compare paying for Tim’s insurance premium outside super versus inside super:
Outside super
Inside super
Pre-tax income needed
$1,967
$1,200
Post-tax income needed
(39% marginal tax rate)
$1,200
$732
If Tim paid the insurance premium outside super, he would need $1,967 in pre-tax income to cover the cost of the premium.
The benefit of the insurance through super strategy means that Tim only needs $1,200 in pre-tax income to cover the cost of the premium. This effectively means he only ends up paying $732 in post-tax money to achieve the same outcome.
The difference is that Tim saves $468 on his annual premium cost ($1,200 outside super minus $732 inside super).
Case study 2 – meet Natalie
Natalie is 49 years of age. She has a casual job and earns $25,000 p.a. She is looking to provide financial security for her family and would like to acquire life insurance cover within her super fund.
The premium for her desired level of cover is $1,000. Natalie can have the premium funded from her employer Super Guarantee contributions reducing her future super entitlements. However, she could make a personal contribution from after-tax money and claim the government co-contribution.
This will not only help fund the premium and provide the required level of insurance cover, but may also increase her future super entitlements.
For example, if Natalie made an after-tax contribution of $1,000, she would be eligible for the maximum government co-contribution payment of $500.
This means Natalie has ended up with her required life insurance cover, with the Government effectively paying half ($500) of her premium ($1,000).
Further information
For further information please contact me at (03) 9886 0623 or email: paul@mentorfs.com.au.
Source: IOOF
