Superannuation is like a house plant. While 80% of the time it’ll happily just sit there, doing its thing, slowly growing, occasionally you need to check in on it and give it a bit of love, otherwise it’s never going to flourish to its full potential. But we get it, it’s hard to know where to start with so much advice floating around about super funds, super contributions, super consolidation and beyond.
That's why we got CEO and Senior Financial Advisor at Henderson Maxwell financial planning fund, Sam Henderson, to round up the nine top tips out there for getting the most our of your super.
1. Find your super
The first thing you will need to do is find your super money so you know where it is. Given that there’s about $16 billion worth of “lost” super, everyone should do this as a matter course.
2. Should you consolidate your super?
OK, so your search is now complete; your next job is potentially to consolidate your super funds. By having just one fund you can save on fees and it can make managing and monitoring your super more convenient. I did say ‘potentially’ because sometimes it’s worth having multiple funds if there are distinct benefits, such as cheap life insurance.
Other reasons you may prefer to have more than one fund include if a fund charges you a high exit fee to transfer your super or you may lose insurance benefits you won’t get from another fund.
Make sure you weigh up all these factors before consolidating your super.
3. Are you eligible for spouse super contributions?
Do you or your spouse earn under $40,000? If so, you may be eligible to make a spouse super contribution of up to $3000 and receive a rebate of up to 18% on your super contribution, giving you up to a $540 rebate.
You get the full rebate if you earn under $37,000 and part of it if you earn up to $40,000. These income levels kicked in from July 1, 2017 and previously the maximum income was $13, 800. It’s a great way to top up the super of a spouse who works part time.
To make the contribution you may need to feel in a specific form or you may be able to do it online using BPAY or direct transfer. Talk to your spouse’s super fund to find out how they accept contributions. You will need to complete the relevant section when completing your tax return to get the offset.
4. Are you a low income earner? You could be eligible for a rebate...
If you’re a low income earner taking home under $37,000, the federal government will rebate some of your super at tax time.
For example, your super fund will be paying 15% tax on all of your super contributions from your employer and you can receive up to a maximum of $500 back.
You don’t have to do anything special to claim the refund. Once you’ve lodged your tax return the ATO will calculate your adjusted taxable income and if you are eligible, it will put the refund directly into your super account.
5. Are you eligible for government co-contribution?
If you earn under $51,813, you may be eligible to make a non-concessional contribution to your super fund, which the government will match with a co-contribution of up to $500. To get the full co-contribution you will need to earn under $36,813.
The aim of the co-contribution is to help low- or middle-income boost their retirement savings.
TIP: You can ask your employer to make these after-tax contributions for you. For example, you could request a $20 per week non-concessional contribution as part of your regular pay arrangement to ease the pain of a lump sum.
6. Should you split your superannuation with your spouse?
Women have around half the super of men at retirement because many have taken time out of the workforce to raise children.
Women make up the lion’s share of part-time workers so they have less of a chance to contribute as much to super from their 9.5% employer contributions.
But for couples, there’s a way to soften the blow; the working partner can super-split. This is where the working partner contributes their after-tax super to their partner. It’s a very simple process, just talk to your super fund about setting this up if you step out of the workforce for a while.
7. Consider salary sacrifice
Salary sacrifice is where you contribute a portion of your gross income (before tax) to your super fund. You are allowed to contribute up to $25,000 a year. So if your financial situation allows for this, it’s a good way to boost your super fund.
8. Should you run your life insurance in your superannuation?
Australian super and insurance are often a great pairing.
Industry and some corporate funds have very cheap life, total and permanent disability (TPD) and income protection insurance policies, so if you’re going to switch funds exercise some caution before cancelling a cheap insurance policy.
9. Review your investment options
Once you’ve consolidate your super funds it’s then time to consider your investment options to ensure they match your attitude towards risk.
If you don’t choose an investment option your super will go into the default option which is usually a balanced option. If you have a lot of time until retirement you may prefer a “growth” option which has more exposure to shares and property. This will be higher risk but there is also potential for stronger returns over the long-term. If you’re closer to retirement though you may opt for a more conservative option.