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Five ways to shape up your superannuation


Published 1 July 2015

Want to give your future self something to cheer about? Here are five ways to get your super working harder.

We all know that our super is important. But do you realise how important it is for women in particular?

Here’s what we know:

  • Women live longer on average.
  • Women are more likely to take career breaks for family, study or other pursuits.
  • Women (still!) earn less than men on average.
  • Women have less super on average.

These are five great reasons to get serious about growing your super. The good news is there are some easy and quick ways to do it.

Strategy 1 – Bring it all together

If you’ve got super floating around in different accounts, combining your super into one account can help you keep track of your money. It can also help you avoid multiple sets of fees.

This process is easier than you might think. Most of the information you need will be on your latest super statement. When you’re consolidating, make sure you look through each of your existing accounts and compare them to ensure you’re choosing the best account for you. Consider things such as the fees you pay and included insurances. You can also look for any lost super via the Australian Taxation Office's website.

The super fund you’re hanging on to (or opening up) will then do most of the actual consolidation work for you.

Strategy 2 – Change investment options

If you haven’t made a choice about how your super is invested, you’re probably letting your employer decide. That’s not necessarily a bad thing, but the ‘default’ they choose may not specifically suit you.

If you’re still a long way from retirement, and your super is being invested in low-risk assets (e.g. in a cash or conservative investment option), you could be missing out on a small fortune in potential growth between now and your retirement.

Check your current investment option, as shown on your super statement, in relation to your retirement timeframe. Make sure you’re comfortable with the growth potential and risk attached to your option, remembering that higher growth potential comes with higher risk.

If you’re not happy with your current investment option, contact your super fund to find out what other options are available to you and what you can do to make any changes.

Strategy 3 – Salary-sacrifice into super

The idea is that you ask your employer to direct some of your salary to your super fund before you pay income tax on it.

  • Inside super you only pay 15 per cent tax on these contributions (if you earn less than $300,000 p.a.).
  • Outside super you pay anywhere up to 49 per cent tax.

The end result is that you take home less pay now, but you pay less tax, and you have more super going into your account.

The government’s MoneySmart super contributions optimiser enables you to play around with different contributions to see how it impacts your tax and super contributions.

Remember, there are limits on the amount that you can contribute to your super each year.disclaimer

Strategy 4 – Take advantage of government perks

Salary-sacrifice strategies are particularly attractive for people on higher incomes who can save more tax. But there are also some ways to boost your super if you earn a lower income over a period of time, such as during a career break.

If you’re eligible the government co-contribution offers a boost to your super of up to $500 if you make an after-tax super contribution. The government co-contribution amount depends on your income and how much you contribute.

Strategy 5 – Check your life insurance

If you’re an employee, your super probably includes some cover for death and total and permanent disability. This is a great perk that most employers have to offer, but the minimum level of cover they provide isn’t enough for most people.

The opportunity here is that you could get some of the cover you need to protect your family in a more cost-effective way than if you bought insurance outside super.

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If you are setting up a salary-sacrifice arrangement it is important to remember there are limits on the amount you can contribute. Most people can contribute up to $25,000 within each tax year (July – June), including their employer's 9.5 per cent super guarantee contribution. This is called the concessional contributions cap.  For those closer to retirement the cap is higher. Check the ATO superannuation rates and thresholds for more information.

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