More super, less effort
Little in life comes for free but some superannuation strategies can help you boost your account balance with barely any outlay.
By Jodie Cook - 4 min read
A little about Jodie
As a Member Solutions Consultant at Russell Investments, Jodie Cook understands all the ins and outs of super and retirement legislation, and loves to answer questions and help members.
Cost of living pressures may be making it more difficult to focus on your superannuation. While there may be no such thing as a free lunch, there are ways to get something for nothing (well, almost nothing) when it comes to building up your super account balance.
Here, I have compiled a list of smart strategies and opportunities that could help you to boost your account balance without much effort. Of course, this is general information only and doesn’t consider your personal objectives, financial situation or needs but it might give you some useful ideas. If you need personal advice, we can put you in touch with the right person.
If you have the capacity, adding extra savings is an obvious way to build your super account balance. To get more bang for your hard-earned dollars, you could consider making a before-tax contribution to your super to take advantage of the lower super tax rate.
Contributions to super are generally taxed at 15 per cent within the fund rather than at the marginal tax rate you pay on your income. If your marginal tax rate is above 15 per cent, you may be able to save tax by directing your before-tax income straight into your super fund by salary sacrificing, for example.
Simply put, less tax paid means more money for you. Let’s look at Sam’s situation:
Sam’s salary is $85,000. If he sacrifices $5,000 to super, he will pay $750 in contributions tax instead of $1,725 in income tax, giving him $975 more to invest.
|With salary sacrifice||Without salary sacrifice|
|Net benefit (take home pay + salary sacrifice)||$66,183||$65,208|
(For illustrative purposes only)
1 The figures used in the table are estimates only and are based on 2022/23 income tax rates, which include the Medicare Levy.
Sam saves $975 into his super account by salary sacrificing, which he would otherwise pay out as tax.
Another option that achieves a similar tax outcome is a personal tax deductible contribution. In this case, you arrange the contribution with your super fund (rather than your employer) and claim a deduction in your tax return. You can read more about salary sacrificing and personal deductible contributions in our article on before-tax contributions
Before-tax contributions can save you tax but after-tax additions to your super account can also be rewarding, particularly if you earn a lower income. In addition to boosting your balance through your own savings efforts, you may qualify to receive a top-up—called a co-contribution—from the government.
The maximum co-contribution amounts to $500 tax-free in the 2022/23 financial year for people earning up to $42,016. If you are eligible to receive the full amount, for every after-tax dollar you put into your super account, the government will contribute $0.50 up to a maximum of $500.
To illustrate this further, if you put in $1,000, you would end up with $1,500 in your super account—the best government-guaranteed return on investment that anyone is ever likely to make.
The payment reduces for every dollar you earn over the income threshold, phasing out for people who earn $57,016 or more in the 2022/23 tax year. Our fact sheet contains more information.
Split with your spouse
No, we’re not suggesting you separate from your partner! Far from it.
In fact, splitting your own super contributions with your spouse is a great way to boost their super account balance, especially if they have less super and/or generally get lower employer super contributions. You can help them by transferring up to 85% of the before-tax contributions made to your account, once a financial year.
What's the benefit? On one hand, you get earlier access to your super if your spouse reaches their preservation age before you and on the other, it may allow you (as a couple) to save tax if you are planning to withdraw a lump sum from super before reaching age 60. It’s worth noting that this strategy is most applicable for people who are nearing retirement. You can read more about contribution splitting in our fact sheet.
One fund, less fees
If you have several super accounts, perhaps as a result of changing jobs over the years, you may be able to save more by rolling your accounts into one.
Having one super account means one set of fees. Over time, paying less in fees can make a significant difference to your retirement savings.
As a bonus, consolidating your super accounts will help you more clearly understand how much super you have and ensure that none of your super is lost. Having all your super in one place can also reduce the amount of paperwork you have to keep track of and can make it easier to manage your investment strategy and reach your retirement income goal.
A word to the wise though—before you combine your super, you should find out about any entitlements or insurance cover that might stop when you close your other account/s.
For more information on consolidating your super accounts, refer to our fact sheet .
Attention to details
There’s an old saying that goes: ‘If you look after the pennies, the pounds will look after themselves’. Similarly, with super, looking after the small details can help you to make the most of what’s available—and maybe get more for less effort.
For example, by simply making sure that your super fund has your tax file number, you may receive a low income super tax offset payment of up to $500 into your account if you earn $37,000 or less in a year and meet other eligibility requirements.
It’s also important to make sure you stay within the limits when contributing to super to avoid paying penalty taxes, because that would mean getting less for more and nobody wants that.
All these strategies involve using super rules to your advantage. If these strategies work for you, they could save you tax and fees and help you get more into your super account.
Remember to look out for non-super savings to help with your budget as the cost of living rises. Local, state and federal governments often offer rebates and grants to help you out.
- For example, many Queenslanders will benefit from a cost of living rebate, while NSW residents may be eligible for assistance paying for children’s activities and road tolls.
- With energy prices rising, various states are offering support, such as the Victorian Power Saving Bonus or Western Australia’s household electricity credit.
- Subsidies and rebates are also available to help you help the environment, such as the nationwide reusable coffee cup scheme, incentives to cash in recyclable containers in NSW and South Australia, and rebates on solar hot water installation in the Northern Territory and solar home batteries in South Australia.
Issued by Total Risk Management Pty Ltd ABN 62 008 644 353, AFSL 238790 (TRM) as trustee of Russell Investments Master Trust ABN 89 384 753 567. Nationwide Super and Resource Super are Divisions of the Russell Investments Master Trust. The Product Disclosure Statement (‘PDS’), the Target Market Determinations and the Financial Services Guide can be obtained by phoning 1800 555 667 or by visiting russellinvestments.com.au or for Nationwide Super by phoning 1800 025 241 or visiting nationwidesuper.com.au. Any potential investor should consider the latest PDS in deciding whether to acquire, or to continue to hold, an investment in any Russell Investments product. Russell Investments Financial Solutions Pty Ltd ABN 84 010 799 041, AFSL 229850 (RIFS) is the provider of MyTracker and the financial product advice provided by GoalTracker Plus. General financial product advice is provided by RIFS or Link Advice Pty Ltd (Link Advice) ABN 36 105 811 836, AFSL 258145. Limited personal financial product advice is provided by Link Advice with the exception of GoalTracker Plus advice, which is provided by RIFS.
This communication provides general information only and has not been prepared having regard to your objectives, financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. If you'd like personal advice, we can refer you to the appropriate person. This information has been compiled from sources considered to be reliable but is not guaranteed. Past performance is not a reliable indicator of future performance. To the extent permitted by law, no liability is accepted for any loss or damage as a result of reliance on this information. This material does not constitute professional advice or opinion and is not intended to be used as the basis for making an investment decision. This work is copyright 2022. Apart from any use permitted under the Copyright Act 1968, no part may be reproduced by any process, nor may any other exclusive right be exercised, without the permission of Russell Investments.