Grow your super - Defined Benefit and Accumulation
For many people, compulsory super won’t be enough to fund a comfortable retirement. Contributing a little extra can make a surprisingly big difference to your savings – it all adds up.
To ensure you retire with enough to afford occasional splurges here and there, you can put a little extra into your super. There are a few ways you can boost your super but which one will work best for you depends on your circumstances.
Did you know as a Defined Benefit (DB) member you can still top up your contributions into your accumulation account? Making additional payments into your accumulation account will be on top of the amounts added into your DB by your employer, so you need to be aware of the caps.
Under the DB plan, your entitlements are calculated according to predetermined, or ‘defined’ formulas. Unlike many other superannuation plans, your entitlements are not directly linked to the contributions paid to the Fund, or investment returns.
The DB plan requires you to contribute 6% of your salary either as concessional before tax payments or non-concessional after-tax, which may impact your total contribution cap at the end of the financial year.
We calculate the amount that is reported to the ATO as being contributed into your DB at the start of the financial year, so you can plan your additional contributions early. The amount differs person to person and our Members Services team can assist you with calculating how much you can contribute above and beyond your employer contributions.
Remember, you are subject to contribution caps, therefore you may pay additional tax if you exceed the concessional contribution cap of $25,000 and/or the non-concessional cap of $100,000 per year.
Your existing accumulation account will accept any concessional or non-concessional payments you’d like to contribute. This account will give you the option of investing your accumulation funds in any mixture of the 11 investments we offer.
Types of Contributions
Within your accumulation plan you can make additional concessional or non-concessional contributions.
A concessional contribution is an amount that’s been added to your super before tax, such as an employer contribution or salary sacrifice, and are taxed at 15%. Comparing that to your marginal tax rate, putting money into super may be a tax effective solution for you.
Also, if you salary sacrifice, you may reduce your taxable income while increasing your super!
More information about salary sacrifice can be found on the Vision Super here.
Non-concessional contributions are after-tax payments such as direct debits or one-off lump sums. Since this money has already been taxed at your marginal tax rate, it will not be taxed when it comes into your super.
If you’re over the age of 65, the government has introduced an opportunity for you to boost your retirement savings by contributing up to $300,000 from the proceeds of the sale of your main residence into your accumulation account. And the best thing is, the amount you contribute under the downsizer initiative is exempt from the non-concessional cap.
More information about Downsizing can be found here.
June 30 deadline
While there are great opportunities to put money into super, annual caps limits apply. You can’t put everything into super to pay less tax, but if you’re under the limit, there’s still time to contribute.
Concessional contribution cap : $25,000 for the 2018/19 financial year and this amount includes your employer Superannuation Guarantee.
Non-concessional contribution cap : $100,000 for the 2018/19 financial year, but if you’re under the age of 65 you can use the “Bring Forward Rule”, where you can contribute three years of the cap in the one year but it means you can’t put any more in for the next two financial years.
There are a few ways you can make a payment:
- BPAY with your account specific reference number
- EFT to Vision Super’s bank account
- Cheque addressed to Vision Super and delivered to our offices in Melbourne CBD.
Remember, if you’ve not received a personal advice meeting, which is inclusive of a Statement of Advice, DB members have access to this completely at no cost. And unlike advisors that work for the big banks our advisors do not receive commissions or bonuses for recommending certain products to you, they will give you advice that’s only ever in your best interests.
For more information go to visionsuper.com.au/advice or contact us on 1300 300 820 for an appointment.