Strategies to get your super back on track

In this article we look at some strategies you can leverage to get on top of your super and get back in control of your financial future.

The global pandemic has had a devastating effect on the personal finances of many Australians. Job losses and redundancies led to large numbers of people having to dip into their savings, feeding financial insecurity and uncertainty. But, while challenges exist, the future is looking brighter. We outline some key super strategies that will help put you back in control of your financial future.

Why is super important?

Next to your home, superannuation is likely to be your most valuable asset, and one we hope will provide a comfortable retirement. It's important to look after it, especially as we're living much longer than previous generations.

But what is a comfortable retirement? The Association of Superannuation Funds of Australia (ASFA) indicates that as at September 2022, singles require $48,266 per annum for a comfortable retirement, which equates to a final lump-sum balance at retirement of $545,000. Couples need $68,014 – or a lump sum of $640,000.

The importance of super becomes obvious when you realise the maximum age pension in 2022 is just $24,356.80 a year for singles and $36,722.40 for couples. To give your super a boost – so you can enjoy the retirement you want – we've outlined some strategies that can help ensure you're in control of your financial future.

Concessional and non-concessional contributions

You can contribute to super either with your before-tax income (known as concessional) or your after-tax income (non-concessional). Just be aware that there are maximum amounts – called 'contributions caps' – you can contribute each year to avoid paying additional tax.

Concessional

These are usually made by your employer into your fund as part of the compulsory Superannuation Guarantee or voluntary salary sacrifice arrangements, see 'salary sacrificing' below. You can also make personal deductible contributions (concessional contributions) and claim a tax deduction. Concessional contributions are taxed at 15% once they're in the fund, which is a rate that is much lower than the marginal tax rate for most. The maximum amount you can contribute each year is $27,500 unless you are eligible for any unused concessional cap carry forward contributions. See 'carrying forward your contributions' below.

Non-concessional

These are made either by yourself or your spouse using after-tax income. The non-concessional cap is $110,000 a year but if you're under 65, you may be able to 'bring forward' two years' of contributions ($330,000) in a single year, depending on your overall total super balance. Be aware that you must have a total super balance below $1.7 million (FY 2021/2022) at 30 June of the previous financial year to be eligible to make a non-concessional contribution. Lower total super balance thresholds apply if you wish to utilise 'bring forward' contributions. Your total super balance includes all super and pension interests. As you've already paid tax on these contributions, they're not subject to the 15% 'contributions tax' by the fund.

Salary sacrificing

Salary sacrificing involves you making a super contribution from your before-tax income, rather than receiving the money as your take-home pay. These contributions are taxed at a maximum rate of 15% in your fund. As this strategy reduces your taxable income, it can be tax-effective as well as being a way to boost your super. 

Spouse contributions

If your partner's super fund could do with a helping hand, you may be eligible to make a non-concessional contribution into it using your own money. This spouse contribution strategy not only helps your partner, but also provides you with the potential to claim a tax offset of up to $540 if your partner is a low-income earner.

The tax offset progressively reduces if your spouse's income is above $37,000 and is completely phased out when their income reaches $40,000.

Concessional contributions splitting

You can also help your partner with their super by transferring up to 85% of your own concessional contributions into their fund, a strategy known as contributions splitting. These contributions usually include your employer's Superannuation Guarantee, salary sacrifice, and personal deductible contributions on which you've claimed a tax deduction.

Conditions apply, such as the contributions generally need to have been made or received in the previous financial year, your spouse must be aged under 65 and not retired, and you cannot split using your non-concessional contributions

Carrying forward your contributions

While the concessional cap is $27,500, you may not always have that amount to contribute each year. But if you have less than $500,000 in your super and pension funds at 30 June of the previous financial year, you're allowed to carry forward any unused concessional contributions accrued since 1 July 2018 on a rolling five-year basis. After five years, any unused amounts expire. This means you may be able to contribute more than the $27,500 cap by using any unused 'carry-forward' amounts to make additional contributions.

Downsizer contributions

It's common when nearing retirement to sell your family home and downsize into a smaller property. But this strategy can also give your super a boost. If you are aged 55 or over, and have owned your family home for 10 or more years, you may be eligible to contribute up to $300,000 ($600,000 combined for a couple) of the sale proceeds into your super fund. This is known as a downsizer contribution. These contributions are not tax deductible, not counted towards your contribution caps, and are exempt from the total super balance $1.7 million contribution restriction.

Government co-contribution scheme

If the federal government wants to give you money, it makes sense to take advantage of it if you can. The government's co-contribution scheme is where the government contributes up to 50 cents into your super fund for every after-tax dollar (non-concessional contribution) you contribute. The maximum amount the government will contribute is $500 depending on your income. You don't need to apply either, as the amount is contributed automatically once you've lodged your tax return.

Search for lost super

One easy way to boost your super is to find some that you've "lost". We have many jobs during our lifetime – especially when we're young – and as we usually need to open a super account each time, there is the potential to have a number of accounts that you no longer use.

Bringing your lost super together is a great way to consolidate multiple accounts into one, which saves on fees. Just be mindful you may lose your existing insurance benefits if you consolidate, so if this is important to you, make sure you check this out, or ask your financial adviser to do it for you.

You can find your lost super by searching the Australian Taxation Office (ATO).

How to rebuild your super if you've accessed it early

During 2020, the federal government allowed people to withdraw up to $20,000 over two consecutive financial years from their super fund. By December 31, 2020, when the scheme ended, more than 3 million Australians had withdrawn $36 billion from their super accounts.

Withdrawing your super can have a massive effect on your final super balance. But as we've shown with these super strategies, there are many ways to get your super back on track. Taking control of your financial future – even by making small and sustained contributions – will go a long way towards giving you the retirement you've always dreamed of.

Want to know more?

Educating yourself about your retirement savings, including your investment options and ways you can boost your balance, is one of the smartest financial choices you can make.  Get your questions about superannuation answered and read inspirational stories from people just like you by visiting our member learning centre.

Get expert guidance

Expert guidance can support you to navigate through this increasingly complex market environment. Speak to a financial adviser if you'd like some support with your financial strategy.

Check that you're on track

Review your super balance and check if you're on track for a comfortable retirement via our online retirement calculator available via ANZ Internet Banking.