Zest! / SUPER 101

Making the most of super contributions

Is super a good investment? “Duh” says regular columnist and superannuation expert John Wasiliev.

By John Wasiliev - 4 min read

A little about John

John Wasiliev writes on personal finance specialising in superannuation and self managed super funds, managed funds and trusts.

If you haven’t done so already and want to live well when you retire, now is the right time to help guarantee this by making the most of your superannuation.  

In a world where there are always investment gimmicks to distract you, like bitcoin or starting your own share portfolio, in my first column for Zest! I’d like to explain why paying attention to your super should be obvious to everyone. 

It is because of the substantial savings opportunities that superannuation encourages. They are substantial because of the generous tax concessions that super offers.* 

Generally, by making the most of your super through contributions whenever you can, it dramatically increases the chances of you accumulating sufficient money to finance a very comfortable retirement. 

Over the many years I’ve been writing and commenting on superannuation for the Australian Financial Review, I’ve advocated it as a great long-term investment that is available to anyone at any time who wants to be confident that when they retire they will be able to afford the lifestyle they want. 

I know this because I’ve reached the stage in my life where I am now spending some of my super as tax free income to make the most of the benefits it offers. 

While this first-hand experience with super is something I’d like to share more about in a future column, this time I’d like to focus on why super is an investment that is too often overlooked by many Australians and why it shouldn’t be. 

Don’t waste the chance 

If there is one thing that has disappointed me about super, it’s the opportunities that are wasted because of misunderstandings people have about it. 

These misunderstandings include believing that superannuation is too complicated to think about, a view that is often encouraged by comments in the popular media to dismiss any sensible discussions about it or to sensationalise a particular opinion. 

Take superannuation’s tax concessions as an example. I’ve seen and heard them described as tax lurks or tax dodges or opportunities to rip off the tax system or the Australian Taxation Office. These are all very colourful ways to dramatise something that is really very basic. 

Super’s main ‘tax lurks’, if you want to call them that, start with lower rates of tax on the contributions you are allowed to make. 

When you make a super contribution, there are certain amounts on which less tax is deducted—15 per cent versus the tax rate of 19 per cent, 32.5 per cent, 37 per cent or 45 per cent that you pay on your salary and wages. You can also save another two per cent of tax that you must pay on your income as a Medicare levy.† 
What is great about these tax concessions is that they have the potential to dramatically increase the value of an investment in super compared to the same investment outside super. 

New contribution rules 

On 1 July 2021, the Government even increased the amount of money you can put into your super at the beneficial tax rates for the first time since July 2017.

The combined total of your employer and your salary sacrificed concessional contributions is now $27,500 per year, up from $25,000, and the non-concessional or after-tax contribution cap has risen to $110,000 per year from $100,000.  

What this means is that currently someone on an average annual income of around $94,000 can expect an employer super contribution of 10 per cent or $9,400 to be added to their account balance each year, leaving up to $18,100 which an employee can contribute per year through salary sacrificing.

On an income of $120,000 per year with an annual employer super contribution of 10 per cent or $12,000, the personal contribution before tax can be $15,500. And there still remains the non-concessional contribution allowance of $110,000. 

Your super piggy bank 

When the compulsory superannuation system was first mooted it was proposed that employers contribute 12 per cent and employees make a 3 per cent contribution for a 15 per cent total. It was suggested that over a working life this would deliver an appropriate amount for a better lifestyle in retirement.

Just what a better lifestyle in retirement might be is different for everyone and at Russell Investments there is a GoalTracker® tool that will guide you to an amount that will be right for you. 

But for this discussion, I believe one of the best illustrations has been provided by the Association of Superannuation Funds (ASFA) which has suggested that to support a comfortable retirement, single people will need $545,000 in retirement savings, and couples will need about $640,000.

This standard—which is updated on a regular basis—illustrates that with these savings and a part government age pension, a homeowning couple could finance a comfortable retirement with an annual income of about $63,800, while a single retiree could enjoy the same lifestyle standard with income of about $45,250.

By comparison, the current single,home-owner financial support someone on the government age pension gets is up to $25,155—while the support for a couple is up to $37,925.

Of course, everyone’s expectations for their retirement lifestyle will be different and your super fund will be able to help you target the right level of savings to suit the plans in your sights.   

What you can safely know from the ASFA standard is that if your superannuation savings reach anywhere near its indicative retirement savings targets or go above, you can generally look forward to a comfortable retirement.  


* To find out more about how super and tax work, check out the Superannuation Basics Fact Sheet, and if you’re a high income earner, take a look at the Understanding How Your Super Is Taxed Fact Sheet.

† Note: Your tax rate (and Medicare levy) may be zero, if your income is lower than the relevant thresholds.

The views and opinions expressed in this article are those of the author and do not purport to reflect the views and opinions of Russell Investments.

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