The beauty of a TPD insurance super fund is that you have a wide variety of options for making contributions. This is unlike TPD insurance outside super.
Compulsory Employer Super Contributions
Based on the government Superannuation Guarantee (SG) legislation, an employer is required to regularly make minimum contributions to the employees' super fund. This minimum contribution is set at 9.25% of the employee's earnings and applies to working Australians between the ages of 18 to 70 years. However, those with a monthly salary below $450 are exempt from such compulsory employer contributions.
The good thing about these compulsory employer contributions is the fact that they are categorized as concessional contributions. This means that you can claim such contributions as personal tax deductions. Even when the portion of your benefit payment made up of the concessional contributions is taxed, you'll only be subject to a rate of 15% rather than the marginal rate. You should also take note that this concessional tax treatment would only apply as long as an annual contribution cap isn't exceeded.
The Australian Taxation Office regularly updates details concerning the applicable concessional cap. The concessional cap during the period 2014 to 2015 is set at $30,000, which is an increase from the previous cap of $25,000 during the period 2013 to 2014. This applies to Australians aged below 50 years.
Voluntary Employer Super Contributions
If your employer makes a super contribution beyond the compulsory amount, it will be automatically categorized as a voluntary contribution. This would be more aptly termed as salary sacrifice, since it involves an arrangement between employee and employer, whereby an employee agrees to the reduction of his/ her pre-tax salary. This is contributed to the employee's super fund.
The advantage with this type of contribution is that you also benefit from the concessional tax treatment similar to the compulsory super contributions. However, you should be aware that your concessional contribution cap will include both compulsory contribution, as well as salary sacrifice.
Personal Super Contributions
When you make a super contribution out of your salary after taxation, it's regarded as a personal contribution. This falls in the category of non-concessional contributions, since it is not tax deductible.
There also exists a cap on the contributions made under the non-concessional category. The ATO indicates that the cap during the period 2014-15 is $180,000, which is an increase from the $150,000 non-concessional cap during the period 2013-14. This applies for Australians below the age of 50 years.
Spouse Super Contributions
It's possible for you to make super contributions for your spouse. However, you should realize that such a contribution, although receiving concessional tax treatment, would count towards your own concessional cap.
Transfers And Rollovers From Other Super Funds
Sometimes you may be forced to open new super accounts due to changing jobs or part-time work. In this case, you can choose to roll over the amounts accumulated in such funds into your current one. However, you should first consider whether you're able to retain the benefits you had in previous accounts. You should also check on the transfer fees that may apply. Taxation on such funds would depend on the original contributions made.
Apart from these forms, you may also benefit from government co-contribution based on special criteria.
Kerrie Peacock is always up to date with current developments within the personal insurance industry. She regularly analyzes the available products within the industry. You can get professional advice by visiting www.mecovered.com.au/tpd-insurance-super-fund to help you get the most comprehensive coverage.