Super Guarantee

All employers are required to provide minimum super cover for eligible employees known as the Superannuation Guarantee. The current level is 9 per cent of your gross salary and it applies to full-time, part-time and casual employees who earn more than $450 gross a month (certain exceptions apply under the law).

Salary sacrifice

Many employers offer salary sacrifice, a simple strategy where your employer contributes a portion of your pre-tax salary to super on your behalf. This contribution usually attracts a tax of just 15 per cent, far less than the average marginal tax rate. That's why salary sacrificing is such an attractive option to boost your retirement savings. Instead of investing that money outside super and paying a higher tax rate, you can contribute it to super and have more money to invest for your long-term future.

Proposed super changes from 1 July 2007 will add even more gloss to salary sacrificing. For example, people aged under 50 (including the self employed) can claim a full tax deduction of up to $50,000 for contributions made to super. For those over 50, this limit increases to $100,000 a year for the next five years only.

After-tax contributions

You can also make your own after-tax contributions otherwise known as undeducted contributions or personal contributions. No tax is deducted from the contribution when it is invested in your super fund as you have already paid tax on it.

Also, when you retire, there is no tax payable on the amount invested. However, tax is still payable on the investment earnings at a rate of 15 per cent along the way. 

But a limit on after-tax contributions of about $150,000 a year is proposed to apply from 1 July 2007. In some cases, you will be able to make a single lump-sum contribution of $450,000 by bringing forward the next three years' contribution into the current year.

In addition, the Government has announced a one-off $1 million limit for after-tax contributions made between Budget night (9 May 2006) and 30 June 2007. 

Spouse contributions

Contributing to super on behalf of your spouse is a tax-efficient way for a couple to save for retirement. If you are employed and your "eligible spouse" is either not working or earning less than $13,800 a year, you can contribute to their super and and gain certain tax benefits.

There is no limit to the amount you can contribute on behalf of your spouse. But you can only claim a rebate of 18 per cent on contributions of up to $3,000 made to a complying super fund for the benefit of your spouse. This tax benefit reduces when your spouse earns more than $10,800, including reportable fringe benefits, and is zero when your spouse's assessable income reaches $13,800.

Co-contributions

This is a Government-funded program to assist those on lower incomes to save for their retirement. If you earn less than $58,000 a year and make personal contributions to super, the Government will match these contributions up to a certain limit.

For example, if you earn below $28,000, the Government will match $1.50 per dollar contribution to a maximum of $1,500. This reduces progressively to no additional contribution at $58,000.

There is no need to apply for it. The Tax Office will use details from your income tax return and contribution information from your super fund or retirement savings account to work out whether you are eligible. If you fall within the limits, the co contribution will be calculated and deposited into your super account. It is not taxed when paid into your account because it is treated as an undeducted contribution.

Self-employed

Proposed changes to take effect from 1 July 2007 will give the self-employed plenty of incentives to invest in super. Currently, if you are self-employed, the first $5,000 of super contributions is fully tax deductible. For amounts over $5,000, 75c of every dollar contributed is deductible.

But the Government proposes to simplify these rules from 1 July 2007 so that your personal contributions will receive a 100 per cent tax deduction up to $50,000. (Remember, if you are 50 now, higher limits may apply.)