7 Easy Ways To Increase Your Super
One of the most shocking conversations I have with new clients, involves discussing how much they think need to live the retirement lifestyle they want compared to how much they actually require.
Most Australians aspire to living a high quality lifestyle in retirement but unfortunately many do not have the savings or assets necessary to support these aspirations.
Despite regular reports and news features highlighting that people were saving less than what they needed to live the lifestyle they expected in retirement, many families are unaware of the various initiatives that could take to boost their retirement savings.
Boosting Your Super Through Increased Contributions
Salary sacrifice contributions
Salary sacrifice is where you elect to have a portion of your before-tax income paid into your super by your employer. This is in addition to what your employer pays you under the Superannuation Guarantee, if you’re eligible, which works out at no less than 9.5% of your before-tax salary. Please, be aware that there are limits regarding how much you are able to contribute to superannuation under a salary sacrifice arrangement.
While salary sacrificing is voluntary, it does mean a reduction in your take-home pay, however the upside is that you will only be taxed 15% on the money you salary sacrifice, it may be a tax-effective way to save for your retirement if you are an above average income earner.
Tax deductible personal contributions are also voluntary contributions, which you can make using after-tax dollars (such as when you transfer funds from your bank account into your super) and then claim a tax deduction on when doing your tax return.
Because personal contributions to your super fund (which you claim a tax deduction on) will only be taxed at 15%, this enables you to achieve the same tax benefit offered by a salary sacrifice. This again enables you to save tax and boost your superannuation balance whilst not affecting your cash-flow over the course of the year.
Personal contributions (and co-contributions)
You can make voluntary contributions to your super using after-tax dollars, which you don’t claim a tax deduction on.
If your total income is equal to or less than $37,697 and you make personal after-tax contributions of $1,000 (and meet other eligibility criteria), you could receive a maximum co-contribution of $500 from the government as well.
If your total income is between $37,697 and $52,697 your maximum entitlement will reduce as your income rises. These figures do change each year but do enable lower income earners a great way to increase their superannuation savings.
Often families will hold a significant proportion of their net wealth via the family home. However, as our kids grow up and leave the nest, often the family home becomes unnecessarily large.
Fortunately, individuals aged 65 and over can now make a voluntary contribution to their super of up to $300,000 using the proceeds from the sale of their home – regardless of their work status, superannuation balance, or contributions history. The best part of this is that both members of a couple can contribute $300,000, meaning as a couple you could contribute a combined $600,000 to your retirement savings.
Downsizer contributions are not tax deductible and can be made regardless of super caps and restrictions that otherwise apply when making super contributions. However, contribution limits do still apply.
Other hints that could see you pocket more money
The spouse contributions tax offset
You can generally make after-tax contributions to your spouse’s super and, if you meet eligibility criteria, claim an 18% tax offset. Broadly, to be eligible for the maximum tax offset, which works out to be $540, you need to contribute a minimum of $3,000 and your partner’s annual income needs to be $37,000 or less.
If their income is above $37,000, you may still be eligible for a partial tax offset. However, once their income reaches $40,000, you’ll no longer be eligible, but can still make contributions for them.
To be able to make a spouse contribution, the receiving spouse must be under the age of 67, or if they’re aged 67 to 74 they must’ve worked for at least 40 hours within a 30-day period under work test requirements.
Consolidating your super
If you do have super with multiple providers, there may be advantages to rolling your accounts into one, such as paying one set of fees which could save you hundreds of dollars each year and even thousands over many years. However, it is important to consider things such as the insurance implications and potential lost benefits of making any changes to your situation.
Reviewing your super situation
Your super fund should be working for you, so it’s important to review it at least once a year. It's useful to check out things like:
Your asset allocations and asset types
Your range of investments
Any insurance cover you may hold
The Fee’s associated within the fund
Is the technology suitable for you