For most of us, superannuation will be our main source of retirement
income. Decisions you make now regarding your super can make a considerable
difference to what you receive as your final benefit.
There are lots of clever ways you can maximise your super. Some
depend on your personal circumstances and may be quite complicated
– it’s best to speak with a financial adviser.
Here are four relatively simple suggestions to boost your super:
1. FIND YOUR LOST SUPER
You may have super in an account that you have forgotten about.
The easiest way to search for your lost super is using the Australian
Taxation Office's online search tool SuperSeeker at www.ato.gov.au/super.
You'll need your tax file number to conduct a search. SuperSeeker
looks for any lost super you may have and instantly provides you
with potential matches. Being able to find lost super is another
reason to give your fund your tax file number, as it provides a
valuable link between you and your super. Some funds also run searches
for lost super on their members' behalf from time to time.
2. CONSOLIDATE YOUR SUPER
If you are like many Australians, you probably have more than
one super fund. Perhaps you've accumulated a few fund memberships
over the years as you changed jobs or even while you worked part-time.
Consider putting your money together in one super fund to streamline
your super so you're not receiving several different statements
and not paying several sets of fees.
Did you know?
Some super funds offer members financial
planning seminars or other sources of financial advice
to help them maximise their super. Check with your fund
to see if this is available and, if so, take advantage
Having fewer points of contact for your super also makes things
less complicated. Not only can combining super funds give you more
control over your investment strategy and your paperwork, it could
also mean there is less chance you'll lose track of your super later
on. Most funds have a standard form you can fill out to provide
consolidation instructions and they will organise to roll-over your
money into your selected fund. Some funds provide consolidation
services to assist you.
Before you consolidate your super or move
your super from one fund to another, check whether the
fund you are leaving charges any fees and whether you
will lose any valuable benefits or insurance cover.
Make sure you won't be left without insurance during
the transition. For more information, take a look at
the 'making an informed choice' tips by clicking
3. MAKE ADDITIONAL CONTRIBUTIONS
The compulsory 9% employer contributions to your super might
not result in the retirement income you want. Your super balance
might seem like a lot of money but once you consider the effects
of inflation and the fact your money might need to last you
20 or 30 years in retirement, you might get a bit of a shock.
Many people also have longer breaks from the workforce throughout
life than they expect, so this limits the size of their superannuation
since contributions may stop for a while.
Consider contributing extra money to superannuation, in addition
to what your employer puts in. You might also think about
making contributions on behalf of a lower-income spouse or
a spouse with less super. You can make contributions to superannuation
or have contributions made on your behalf until you are aged
65, regardless of whether you are working or not.
Tax advantages of superannuation make it a very attractive
way to save for retirement. It's usually more beneficial to
invest for retirement through super than to make identical
investments outside superannuation. And now there are no limits
on the amount of final superannuation benefit you can take
on a concessionally taxed basis, the more you have in super,
the merrier your retirement. Another reason to gradually put
extra into super earlier is there are now caps on how much
you can contribute to super each year on a concessionally
taxed basis. For more infromation about contribution caps,
So you can't leave it until close to retirement and expect
to suddenly contribute a very large amount to your super in
one go. For more information on the tax advantages of super,
There are two ways you can contribute more to your super:
- You can contribute into a super fund using your money
which has been subject to income tax already.
- You can arrange with your employer to take less in your
pay packet in exchange for them putting pre-income tax money
into your super. Because super is taxed at less than most
marginal tax rates, this 'salary sacrifice' arrangement
means you get more money going into super. You could also
reduce your income tax.
If you are interested in salary sacrificing
into super, check if your employer allows it and speak
with a financial adviser to see if this strategy is
right for your situation.
Remember that annual caps apply to what can
be put into super on a concessionally taxed basis. For
more infromation about contribution caps, Click
A LITTLE SACRIFICE NOW CAN HAVE POTENTIALLY BIG BENEFITS
‘Salary sacrificing’ is where you choose to give up gross
salary or wages and arrange with your employer to contribute
the ‘sacrificed amount’ into your super fund. This may reduce
your assessable income for taxation purposes. It will also
boost the amount of money you have working for you because
when it is put into super it is taxed at only 15%, rather
than your marginal tax rate.
Consider asking your employer to put any
pay rises, tax cuts or bonuses into your super fund.
Because you keep your take home pay the same, there's
no compromising on your current lifestyle. This can
potentially reduce your income tax and you’ll also benefit
from the power of compounding on your super balance,
giving you more for your retirement. But keep a close
eye on your contributions so you don’t accidentally
go over the contributions cap and have to pay tax on
those excess contributions.
There are compelling reasons to make additional personal
contributions to super from your after-tax money. You might
have money available to contribute which is not directly from
your pay packet so can't be salary sacrificed. Or your employer
might not allow you to salary sacrifice. Or you might want
to take advantage of the Government’s Super Co-contribution
initiative. By making after-tax contributions you could access
up to an additional $1,500 a year. By making after-tax contributions
on behalf of your low income spouse you could also get an
18% tax offset worth up to $540 a year. For more information
about the Government’s Super Co-contribution initiative, click
here and about spouse contributions, click
KNOW THE LIMITS
From 1 July 2007, caps apply to the amount of contributions
that can be made to superannuation each financial year on
a concessionally taxed basis. If you contribute amounts beyond
the contribution caps, the excess contributions will effectively
be taxed at the top marginal tax rate plus Medicare levy.
Concessional contributions cap:
- This cap includes the compulsory 9% employer contributions,
employer notional defined benefit contributions, amounts
you salary sacrifice, and contributions you make if you
are self-employed and claim a tax deduction. Contributions
are capped to $50,000* per annum. Under transitional arrangements,
if you are at least 50 years of age, the limit is higher
at $100,000 per annum until the end of the 2011/12 financial
Non-concessional (after-tax) contributions cap:
- This cap includes contributions you make yourself using
after-tax money. Contributions are capped to $150,000**
per annum. If you are less than 65 years of age, you can
‘bring forward’ another two years worth of non-concessional
contributions, allowing you to contribute up to $450,000.
Christine has decided that from her 45th birthday
onwards she will commit to a disciplined savings plan for
her retirement. After reviewing her budget, she knows she
can commit to saving an additional $3,000 a year from her
take home pay packet. Christine already has some money in
a super fund, so was thinking of complementing this with making
some extra savings outside of superannuation.
Christine talked with her financial adviser about
her goals and was surprised to find out she could end up with
more than $100,000 extra savings at age 65 if she ‘salary
sacrifices’ into super, rather than puts money into an investment
outside of superannuation.
Because Christine is on a marginal tax rate of
41.5%, including the Medicare levy, by arranging with her
employer to forgo $3,000 from her take home pay packet, this
actually equates to $5,128.21 before tax. So she gets more
money working for her in the tax advantaged environment of
CONTRIBUTING LATER IN LIFE
The compulsory 9% employer contributions are only required
to be made until age 70 years.
If you aged under 65 years, you can make contributions to
superannuation or have contributions made on your behalf at
From age 65–74 years, those wanting to contribute must have
worked at least 40 hours within 30 consecutive days during
the same financial year, known as the ‘work test’. You must
make a new employment declaration for each financial year
that you want to contribute. Spouse contributions can only
be made on your behalf if you meet the ‘work test’ and until
age 70 years.
Self-employed people and employers contributing for employees
can claim a full deduction for super contributions made for
themselves or their employees until age 75 years.
Personal after-tax contributions can only be made until age
Keep in mind that contributions counted towards
the annual caps can add up across your different super
accounts and across types of contributions. So you need
to keep an eye on your concessional and non-concessional
contributions to avoid exceeding the caps and therefore
avoid the top marginal tax rate plus Medicare levy.
4. TAKE ADVANTAGE OF THE CO-CONTRIBUTION
The Government’s Super Co-contribution initiative
allows you to increase your super by making personal
contributions from after-tax money. The income thresholds
for the co-contribution are indexed annually.
Based on the figures that apply from 1 July 2007,
if you contribute money yourself into super from your
after-tax income and earn less than $58,980^, you could
be entitled to a co-contribution made by the Government
to help grow your super. Whether you are an employee
or self-employed, if you meet certain criteria, this
co-contribution could be as high as $1,500. This is
an annual opportunity so, providing you meet the criteria,
you could receive a co-contribution each year.
To be eligible you generally need to:
- Make a personal (after-tax) contribution to superannuation
- Earn less than $58,980^
- Earn 10% or more of your income from carrying on
a business, eligible employment or a combination of
- Lodge an income tax return for the year you have
earned your income
- Ensure your super fund has your tax file number
- Be under 71 years of age at the end of the financial
If you meet the eligibility criteria and your income
is less than $28,980^, then you may receive from the
Government $1.50 for every after-tax dollar you contribute
to superannuation up to the maximum co-contribution
of $1,500. The maximum co-contribution reduces by 5
cents for every dollar you earn over $28,980^, phasing
out completely when earning $58,980^ or more each financial
Your co-contribution is payable after:
- you have lodged your income tax return
- your superannuation fund has lodged a member contributions
statement for you; and
- the Australian Taxation Office has received any
additional information required.
For more information about the Government’s Super Co-contribution
initiative, see www.ato.gov.au/super.
Did you know?
Your personal after-tax contributions
and the co-contribution made by the Government
are not taxed when deposited into your super
account or when you withdraw them.
As long as you make personal after-tax
contributions and meet the eligibility criteria,
the co-contribution will be paid in to your super
account each year. The Australian Taxation Office
has a calculator to help you work out the co-contribution
you could be eligible to receive at www.ato.gov.au/super.