Five tips to boost your super
Here are some clever tips that make topping up your super savings simple.
By Joel Atputharaj - 3 min 54 sec read
A little about Joel
Joel Atputharaj is a senior manager at Russell Investments. A Fellow of the Institute of Actuaries, he helps clients navigate complexity and has worn many hats across the superannuation and consulting businesses, including actuarial consulting, account management, insurance and fund administration.
The more you contribute to your superannuation, the better off you are likely to be in retirement. But it can be difficult to find extra money to put into super, when there are bills to pay and items to buy in the here and now. These five tips could help you boost your super in ways you will barely notice today.
Tip #1 – Salary sacrifice your pay rise
Let’s be honest, it can be easy to spend what you earn. The one time you will have more cash than you have allocated elsewhere is when you get a pay rise—a perfect time to add more to your fund without feeling it in your pocket.
Take Sarah. She earns $80,000 a year and has just got a 2 per cent pay rise. That’s $1,600 a year more in her pay cheque! Woo hoo!
But wait, then there’s tax. Sarah would pay 34.5 cents tax (including the medicare levy) on every one of those extra dollars, giving her $1,048 in her pocket—just over $20 a week.
Instead, Sarah chooses to salary sacrifice her pay rise. Salary sacrificing means making a contribution to super from an individual’s before-tax pay. The contribution is deducted from their total salary before income tax has been calculated and forwarded to their super account.
With Sarah deciding to salary sacrifice her pay rise straight into her super fund, she gets to keep $1,360 because salary sacrifice amounts are taxed at only 15 per cent. Sure, that’s still only $26 a week, but contribute it into super, and with the benefit of compound interest, it will be worth a lot more when Sarah retires.
She is unlikely to miss that money since she sent it straight into super before she got used to spending the extra amount.
Tip #2 – Salary sacrifice your bonus
Another time you might have surplus cash is if you get a bonus at work. Here’s another chance to contribute to super without taking income you’re used to spending.
You can either organise with your employer to have your bonus contributed straight into super before you receive the money or arrange with your super fund to make a personal deductible contribution for which you can claim a tax deduction.
Tip #3 – Contribute your windfall
Who hasn’t daydreamed of winning the lottery or inheriting a fortune from a long-lost relative? If you do come into some money through a windfall, gift or bequest, you could commit to contributing at least some of the money into super before you spend it elsewhere. The same goes if you sell a valuable asset—whether that’s an investment like property or shares, or something non-financial like a rarely used jet ski, an artwork or your collection of porcelain figurines.
Sure, topping up your super is less fun than taking a holiday. And you might have a home loan or other debts to pay off. But superannuation offers a tax-effective environment for investing for the long term. It’s worth considering an addition to your future wealth when you get the opportunity.
Tip #4 – Get money for nothing
There may be no such thing as a free meal, but getting money from the government simply for adding to your super fund comes fairly close.
Lower and middle-income earners who contribute after-tax savings into super may be eligible to receive a top-up from the government as a reward for their savings efforts. The maximum available is a $500 top-up which is available to eligible people earning up to $41,112 who add $1,000 of their own savings into super (in the 2021-22 tax year). The amount decreases depending on how much you contribute and how much you earn, phasing out at an income level of $56,112.
Yes, you do have to add money yourself, but no other investment will give you a guaranteed 50 per cent return on your savings.
Tip #5 – Check your employer super is paid on time
You go to work; your employer pays your super. Most often, it’s a simple and standard process.
If you’re an employee, most likely you will receive superannuation payments from your employer directly into your super fund as part of your wages or salary. The same goes for some contractors, too.
Employer payments to your super—known as superannuation guarantee (SG) contributions—are worth 10 per cent of pay. The rate will lift to 10.5 per cent from 1 July 2022 and 12 per cent by 2025.
Employers have up to three months to pay superannuation into your fund, but sometimes a very small number of employers don’t meet this timeline.
What can you do? It’s generally good to check your super account and your balance, either online or via your super app, or when you get your annual statement, to make sure contributions are going in as they’re meant to. If you can’t see a record of funds going into your super account, check with your employer to make sure the super details they hold for you are correct and up to date. Not sure about your account details? Check with the ATO via myGov to verify your account details.
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Keep an eye on those contribution limits As with anything, super contributions come with limits. As you decide how much to contribute, it’s important to keep an eye on those limits that restrict the amount you can contribute to super in any particular year before you have to pay additional tax. |
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