The end of the financial year can be an important one for superannuation fund members. As well as being the cut-off to get money into a retirement savings vehicle that is the most effective tax-wise, June 30 is a good time to think about how to best put your finances together for the new financial year.

There are several ways people can contribute to their superannuation.

One way that applies to every working Australian is the 9 per cent superannuation guarantee levy.

Here, your employer is required by law to contribute at least 9 per cent of your salary into a nominated superannuation fund.

The tax rate on this amount - up to a set limit depending on your age - is at a concessional rate of 15 per cent, instead of your normal marginal tax rate, and represents a form of forced saving.

As well as limits on concessional contributions, limits apply to contributions people can make from their after-tax salary.

Your age and salary as well as the age and salary of a spouse will, in many cases, determine whether you want to use superannuation to save for your retirement beyond the superannuation guarantee.

One of its benefits might be that the income earned on the investments inside superannuation are taxed at 15 per cent; however, it may not suit everyone to have their money tied up, in effect, until they reach retirement age.

After years of changes to superannuation limits and tax rates, one of the risks of superannuation often referred to is legislative risk, or the possibility of further government changes to superannuation rules.

Change is always a possibility but the most likely foreseeable changes are to the rules surrounding self managed superannuation funds (SMSFs), says the head of technical services at ipac Securities, Colin Lewis.

He says the final report into superannuation as part of the Super System Review, chaired by Jeremy Cooper, is expected to stamp out exotic investments by SMSFs, such as in art and vintage cars, to make them more mainstream.

The director of financial advice consulting group Strategy Steps, Louise Biti, says that while the emphasis for June 30 is always on the best way to reduce tax liabilities for that year, such as through superannuation, it should also be a time to plan for the next financial year.

"You get much better opportunities to reduce the tax you pay at the start of year," she says.

"So why not use the end of this financial year as a trigger to do something for next financial year?"

Setting up salary sacrifice arrangements before you earn the income is possibly the most important one to plan for because you can't sacrifice salary after it is earned.

Biti says there are other ways people might be able to boost their super balance and, through careful planning, receive concessions that apply to superannuation.

These are: from the sale of a business; when there has been a personal injury payout; transfers of money from overseas; and through a divorce settlement.

Concessional contributions

The penalties being applied by the Australian Taxation Office to those people who exceed the concessional contributions cap to superannuation are a good reason to take note of the limits.

A person aged under 50 can make contributions of up to $25,000 a year. Someone aged 50-74 can contribute a maximum of $50,000 a year.

A director of Partners Superannuation Services, Martin Murden, says it is important to remember the maximum applies whether you make the contribution or whether it is made by an employer.

So, in addition to the 9 per cent your employer might pay into your superannuation, any additional contributions you make through an existing salary sacrifice arrangement with your employer will also be counted as a concessional contribution up to the limit. For contributions that exceed that limit, you may be subject to a penalty at the top marginal rate of 46.5 per cent.

Non-concessional contributions

Super fund members can also contribute after-tax dollars to superannuation as a way of saving for retirement; however, the maximum allowable is $150,000 a year.

Martin Murden says that those under 65 can pay up to three years' contribution ($450,000) in the 2009-10 financial year.

"This can only be done if the contribution cap has not been exceeded in either 2007-08 or 2008-09," he says.

"If more than $150,000 was contributed in either of the two previous tax years, contact your adviser to determine the maximum that can be paid in this tax year. If a member breaches the maximum payment allowed, they risk penalty tax at the rate of 46.5 per cent and potentially 93 per cent of the excess amount."

If already high non-concessional contributions tip over a concessional cap, the member is looking at a 15 per cent contributions tax (on the concessional contribution), a 31.5 per cent penalty tax (on excess concessional contributions) and 46.5 per cent (on excess non-concessional contributions).

Co-contributions

Often referred to as a free kick from the federal government, the co-contribution essentially offers a guaranteed 100 per cent return to those who qualify.

Anyone earning less that $31,920 a year who contributes $1000 of their after-tax money to superannuation will be entitled to the full contribution of $1000 from the government.

Individuals earning up to $61,920 who make an after-tax contribution to superannuation may be eligible for a part contribution. (See table.) The chief executive of the Australian Catholic Superannuation & Retirement Fund, Greg Cantor, says that for Australians eligible for the co-contribution scheme, it is a great way to boost retirement savings and get a top-up from the government.

Contributions must be physically received by their super fund by the close of business on June 30 to qualify in this financial year.

The Tax Office will work out whether people are eligible for the co-contribution, so no forms are required.

Colin Lewis from ipac Securities says that it is no longer possible for people to reduce their taxable income to below the co-contribution threshold by salary sacrificing into super and then making an after-tax contribution to get the co-contribution.

"Previously, money that was salary sacrificed was not part of assessable income," he says. "It is now added back, with the aim being to target the co-contribution at genuine low-income earners."

Salary sacrifice

Salary sacrifice is popular for people nearing retirement who want to boost their super fund account balance.

It is a formal arrangement that is put in place with your employer, whereby a portion of your salary is paid directly to your super fund. Instead of paying your marginal tax rate, you pay the super contributions tax rate of 15 per cent.

Any salary forgone in this way will count towards the age-based concessional contributions cap.

If you are 50-74, a maximum of $50,000 applies and $25,000 if you are under 50 (including the 9 per cent super guarantee).

If this is something you are thinking of doing in the 2009-10 financial year, then arrangements should be put in place with an employer at the start of the year.

Transition to retirement

Transition to retirement laws were introduced in 2005 to allow people who were aged 55 and over who wanted to wind down their work commitments and draw on their superannuation to meet their income needs.

Used with salary-sacrifice arrangements, it can be a tax-effective way for someone to continue to build their superannuation savings and draw a tax-free income.

Its popularity has dropped since the concessional contribution caps were halved to the present rates.

Centric Wealth says the combined effect of starting a transition to retirement income stream from a superannuation pension, while salary sacrificing into the same pension, could leave a neutral cash flow and superannuation balance position.

By replacing salary income with super income and redirecting salary to super, a person is effectively taking advantage of the tax concessions offered by super.

The idea is to improve net income, reduce tax and increase the end retirement benefit, Centric Wealth says.

Spouse super contribution

Taking advantage of the lower marginal tax position of a spouse is worth looking at when it comes to making super contributions.

If one spouse's income is less than $10,800, then the other can put up to $3000 into the spouse's super fund and receive an 18 per cent rebate ($540) in tax.

Super splitting

Dividing super between a couple was once a popular way to avoid limits on how much superannuation individuals could hold before they had to pay tax upon retirement.

Louise Biti from Strategy Steps says the removal of those limits a few years ago means super spouse splitting is more likely to be done when a couple wants to even up the balances between them.

"It's more to do with the control and management of the money than anything else," Biti says.

Put simply, one person transfers up to 85 per cent of concessional contributions made in the previous year out of their superannuation fund into the fund of their spouse.

Biti says in the case of an older spouse who is nearing retirement, putting more superannuation money in their name would give earlier access to superannuation.

The national manager of advice development at ipac Securities, John Dani, says other uses for contribution splitting to a spouse include: moving super from an older spouse to a younger spouse to shelter investments from Centrelink testing for longer; and to enable a non-working spouse to fund life insurance via their super.

Case study

An Australian Catholic Superannuation & Retirement Fund member, Sharron Lynch, has been taking advantage of the federal government's superannuation co-contribution scheme since it was introduced in 2003.

In that time, the government has put $7500 into her superannuation account.

"I am the classic example of a lot of Australians who have a small superannuation balance," Lynch says.

"The government's superannuation co-contribution scheme has provided me with an incentive to save for my future."

Under the scheme, when a person's assessable income is $31,920 or less, the government will pay up to $1 into their superannuation fund for every dollar they personally contribute — up to a maximum contribution of $1000.

The payment is scaled down at the rate of 5¢ a dollar and phases out completely for people with assessable incomes of $61,920 or more.

At its peak, the government was paying $1500 for eligible workers who put in $1000 of their own money.

Time out of the workforce to raise two children and a return to work part-time means Lynch has a relatively low super account balance, something that is not uncommon for many women.

Lynch contributes $40 a fortnight from her take-home pay into her ACSFR account so that she doesn't have to find the full $1000 contribution at the end of the year.

"I don't miss the $40 but I would miss the $1000 out of my account," she says.

"I have to make a small sacrifice but it is a deal too good to miss."