Super is the centrepiece of retirement planning but all too often, it is left to linger in the background instead of being given the attention it deserves. After all, with your money and retirement lifestyle at stake, it’s worth finding ways to streamline your super and to take advantage of opportunities to make it work harder for you.
These five tips will help you get started.
1. Maximise tax advantages
As employees, we often treat our super as something our employer takes care of, and a cursory glance at our annual statement may be the only attention we give it. What you might not know is that recent changes to tax incentives have created potential opportunities to give your super a real boost.
As of July 2017, employees can make tax-deductible (concessional) super contributions on top of the compulsory contributions their employers make. This effectively means that the government is making a potentially huge contribution to your retirement benefits through the tax system — an opportunity simply too big to ignore.
Another way for employees to use the tax system to enhance their super is through salary sacrificing. This is a formal arrangement you make with your employer to direct some of your pre-tax salary toward super contributions, thereby reducing your salary for tax purposes.
Choosing whether you should make deductible contributions or salary sacrifice will depend on your individual circumstances, so consult a financial adviser to help make the right choice.
2. Advantages of after-tax contributions
While making concessional contributions is a great way to boost your super using the tax system, there are limits on the level of contribution you can make each year and still receive concessional treatment. If you are approaching retirement, you may want to load your super beyond these concessional limits.
Fortunately, you can make after-tax (non-concessional) contributions to do this. While these contributions don’t benefit from tax deductibility, they do have the significant advantage of avoiding the 15 per cent contributions tax, so that the full value of your contribution reaches your superannuation account.
Consult a financial adviser to help determine how you can best balance your pre and post-tax super contributions, and stay within the limits for optimal tax efficiency.
3. Consolidate and save
If your super is spread across multiple accounts due to changes in employment over the years, chances are you could be frittering away valuable retirement savings in unnecessary costs. You pay administration and other fees on each super account you have, and may also have multiple insurance premiums deducted from those accounts.
The solution is to consolidate your super into one fund. To do this, you first need to find out how much you have in each account, and identify if you have any lost or forgotten super accounts. Seek assistance from a financial adviser to assist with this, as well as consolidating those accounts into one fund to increase cost efficiencies and better focus your investment strategy.
4. Access government support
If you are a low or middle-income earner, there are government schemes in place that can significantly improve your super situation. For example, you may be able to make non-concessional contributions of up to $1000, and qualify for a government co-contribution of up to $500 toward your super. This scheme is currently available to anyone who earns less than $51,813 (for the 2017-2018 financial year).
Another option is the spouse contribution scheme, which allows you to contribute up to $3000 to your spouse’s super account and receive a tax rebate of 18 per cent (up to a maximum $540) if your spouse earns less than $37,000. The rebate amount tapers off if your spouse earns more than $37,000 and they become ineligible once they reach $40,000.
5. Review your insurance in super
Having proper levels of life and disability insurance is a foundational principle of any personal financial plan. Your super may include insurance cover, but is the amount appropriate for your needs?
As you go through stages of life, your cover needs can vary dramatically and in later years, you may end up with more insurance than you need. The only way to determine the right level of cover is to have a proper insurance needs analysis done. Engage a qualified financial adviser to perform this for you — it could mean having a greater proportion of your super contributions going toward your retirement rather than being lost on unnecessary premiums.
What are your top tips for getting your super in shape? Share your thoughts below.