Even small, regular contributions to you super over the long-term can make a large difference to your retirement savings. The earlier you start, the better off you will be.
With life expectancies growing, it is now more important than ever to start making contributions to your super as early as possible. The longer you can take advantage of compound interest by contributing early, the better. It's important to understand all of the different types of contributions made to super and how they affect you.
Water Corporation contributes a minimum 9.5% of your base pay into your super account by law. As a bonus, the Water Corporation will also pay an extra 2% into your account if you choose to contribute at least 3% from your own pay.
Water Corporation Superannuation Plan offers eligible Water Corporation employee members a top-up bonus to help grow your account faster.
By simply adding 3% pa of your salary, the Water Corporation will add another 2% pa to your annual contributions. That's a total of 14.5% into your super! To be eligible, you must not be on a common law contract or a Limited Member.
You can choose to pay your 3%, either before tax (salary sacrifice) or after tax. This choice is yours and this extra contribution is exclusive to the Water Corporation Superannuation Plan and for employees of the Water Corporation.
The Government has announced the rate will remain at 9.5% until 30 June 2018 and then increase by 0.5 percentage points each year until it reaches 12%. Water Corporation has committed to continue to the extra 2% top up at least until the end of the next Enterprise Agreement.
If you are an existing member of the WCSP and wish to contribute 3% from your pay, complete the relevant section of the Change in Details Form.
Additional contributions are contributions you make, in addition to the 9.5%, into your super. You can make them either before tax (salary sacrifice) or after tax (non-concessional).
Salary sacrifice is an arrangement you make with the Water Corporation to reduce your taxable income by increasing your super contribution. Instead of taking your full salary taxed at your marginal rate, you nominate a portion of 'before tax' money and the Water Corporation puts it directly into your super account.
Additional contributions may also be made by a current GESB member when they open a Limited Membership account with the Plan, enabling them to make 'top-ups' either before tax (salary sacrifice) or after tax.
Mary, Peter and James all started work at Water Corporation, earning $75,000 a year. Mary made a salary sacrifice arrangement to sacrifice 3% of her income into her super account and James made an arrangement to sacrifice $10,000 pa of his income into super. Peter did not salary sacrifice any of his salary.
The following table shows the difference between Mary, James and Peter's taxable income and rates of tax at the end of the 2015-16 income year:
|Super salary sacrifice||$2,250||$10,000||-|
|Income tax (using the 2015-16 tax rate)||$15,191||$12,672||$15,922|
|Income tax and Medicare levy payable||$16,646||$13,972||$17,422|
|After tax income||$56,104||$51,028||$57,578|
|Tax on salary sacrificed super (15% in the fund)||$337.50||$1,500||-|
Source: Western Financial
There are annual limits on the amount of concessional and non-concessional contributions you make. And, it's up to you to keep tabs on how much you've contributed. Exceeding the limits can mean paying more tax!
|Contributions caps 2015-16|
|Limit (cap)||Tax rate if you go over the cap|
Amounts over $30,000 will be added to your assessable income and taxed at your marginal tax rate.
Amounts over $35,000 will be added to your assessable income and taxed at your marginal tax rate.
49% for amounts over $180,000.
* Indexed at six times the annual concessional contribution limit.
As you can see from the above table, you can actually contribute three years' worth of non-concessional contributions in one financial year. However, if you use this option, you won't be able to make any non-concessional contributions for the following two years even if the cap increases.
It's important to stay within the annual limits when making concessional and non-concessional contributions. Any excess amounts over the concessional and non-concessional contributions limits (from 1 July 2014) will be taxed in line with your marginal tax rate including the Medicare Levy plus an Excess Contribution Charge.
It's also up to you to do the sums on your contributions. So, if you're not sure how much you've contributed, please call our Super Team on 08 9420 3008.
Even if you've left Water Corporation employment, your new employer can direct contributions to the WCSP.
Retained (past Water Corporation employees) and spouse members are able to direct contributions to the WCSP from employers other than Water Corporation.
Simply have the alternative employer complete a Participating Employer Agreement. This means you can continue to grow your account without having to join a new superannuation plan.
Spouse members can consolidate their super by having all their superannuation arrangements under the WCSP and in this way reduce additional administration fees.
Retained and Spouse members can also make personal contributions to the Plan. These contributions can be made pre-tax if the alternative employer agrees.
The employer contributions will need to be in line with SG contribution requirements, however can exceed requirements if that is the practice applied by the alternative employer.