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Tips on growing your super
Increase your contributions
One way to increase the amount you will have when you retire is to increase the amount you contribute regularly to your super.
It is compulsory for employers to contribute 9% of your salary as superannuation, but many people will require more than that to live comfortably in retirement. Depending on your circumstances, many advisers recommend that you contribute an additional 6% of your salary to super, to make it a total of 15%. You can do this by making personal after-tax contributions or through salary sacrifice.
Depending on your circumstances, it may be a good idea to contribute one-off payments, such as employment bonuses, to your super.
Start early
The earlier you start making regular contributions, the better off you may be. Not only will you have more time to accumulate, you’ll also benefit from compound returns on your earlier investments. This means you’ll not only earn interest on the money you contribute, but also on the cumulative interest earned on those funds.
Tax tips
To avoid paying more tax than you need to, make sure you provide your tax file number to your super fund. If you don’t provide it, only Superannuation Guarantee contributions will be accepted and these contributions will be taxed at the highest marginal tax rate.
| Contribution type | Tax to pay (as at 1 July 2010) |
| Employer contributions¹ | Taxed at 15% when paid into the fund – subject to concessional contributions cap. |
| Salary sacrifice contributions¹ | Taxed at 15% when paid into the fund – subject to concessional contributions cap. |
| Self-employed contributions¹ | Fully tax-deductible up to the age of 75 (terms and conditions apply) – subject to concessional contributions cap. |
| Personal contributions | No tax payable on the first $150,000² contributed per year (or $450,000 over three years if you’re 64 or younger – conditions apply). Additional contributions are taxed at 46.5%. |
| Spouse contributions | If your spouse’s³ income (and any reportable fringe benefits) is less than $10,800, and you contribute up to $3,000 to their super account in a financial year, you can claim a tax-offset* of 18% on post-tax contributions. You’ll boost their super balance and receive a tax benefit too. |
| Government Co-contributions | No tax payable as the contribution has already been subject to income tax. |
1 Subject to maximum concessional contributions cap of:
- Under 50 years - $25,000 per year (subject to indexation for future years).
- 50 to 74 years - $50,000 per year up until 1 July 2012.
Any contributions above these caps are taxed at the highest marginal tax rate, currently 46.5% (including medicare levy) and will count towards the non-concessional contributions cap.
2 Subject to indexation for future years.
3 Your spouse is a legal or de facto husband or wife who lives with you on a permanent basis. To be eligible for the tax offset, your spouse must be under 65 years old if they are not working.
4 The tax offset reduces up to a salary of $13,800, at which point it cuts out.
Keep track of what you’ve got
You don’t want to end up with multiple super accounts – because with each new account comes another set of fees and an increasing likelihood that you’ll lose track of the money you have invested.
Instead, choose a fund with competitive fees and a consistent performance record and consolidate your money into one superannuation fund.
If you think you might have some ‘lost’ super, you can look for it via the Australian Tax Office website at www.ato.gov.au/superfunds and click on individuals superannuation – home.
Government Co-contribution - 100% return on your super¹
A co-contribution is a payment the government makes into your super fund when you make a personal contribution. If you earn less than $31,920² the government will pay $1 for every $1 you contribute (after-tax) to your super fund - up to a maximum of $1,000.
This means that for every $1,000 you contribute, you’ll actually be boosting your super by $2,000. That’s a significant incentive to get you investing in your future.
The co-contribution amount drops by 3.33 cents for each dollar you earn over $31,920, phasing out when you earn over $61,920².
For further information on co-contributions, go to the Australian Tax office website at http://ato.gov.au/superfunds/ and click on individuals superannuation – home. On this website there is a Super Co-contribution calculator which helps individuals and the self employed estimate their co-contribution entitlement and eligibility
1. Until July 2011
2. For the 2010/11 financial year earnings include reportable fringe benefits, net business income for self employed people, total net investment losses and salary sacrifice superannuation contributions.
