The Federal Government made headlines last year when it announced a number of changes to superannuation which will come into effect in July. Despite the changes that will take place, there are still major incentives for people to maximise their super and ensure they enter retirement with a comfortable nest egg.Although the topic of superannuation is not the most entertaining, it does not need to be difficult. The following ways to maximise one’s super can have substantial effects all while being very straightforward to carry out.
The following ways to maximise one’s super can have substantial effects all while being very straightforward to carry out.
Roll All Accounts Into One
Better known as ‘consolidation’, transferring all of one’s super accounts into a single account has the instant benefit of only having to pay one set of fees, which can save thousands of dollars depending on the amount of super accounts held. It is estimated that at least 2.7 million Australians have more than three super accounts, which means that hundreds of dollars, if not more, is unnecessarily being spent on fees each year.
The online government services platform MyGov allows taxpayers to view all superannuation accounts in their name via the Australian Tax Office (ATO) program Super Seeker. From there, they can choose the account they wish to keep and consolidate the others, which can usually be done online.
Make Extra Contributions
As of July, the tax laws regarding personal super contributions will be extended to cover all income earners. While the current law (which ends at the end of the 2016/2017 financial year) essentially only covers self-employed persons, all individuals earning a salary, wage, or other types of income will be allowed to claim a deduction for any after-tax super contributions they make to complying super accounts.
For instance, if someone earned a salary income of $80,000, they would incur $17,547 in tax, not taking into account any deductions or the Medicare levy. If that person made $25 of after-tax super contributions every week ($1,300 for the entire financial year), their tax liability would decrease to $17,124.50 – a $422.50 tax saving.
Take Up Salary Sacrifice
Many employers offer a salary sacrifice option for employees to make contributions to their super accounts before tax is paid on their earnings. By utilising the salary sacrifice option, these employees can make a substantial difference to their super balance with minimal effort.
At most workplaces, the payroll department will do the work of setting up pre-tax super payments via salary sacrifice at the employee’s request, which makes this way of maximising super as easy as sending an email. As the contributions are made prior to paying tax, a person’s taxable income decreases, which also decreases the amount of tax that person is required to pay.
This helps to make salary sacrifice an effective, easy, and money-saving exercise to maximise super, especially when done in conjunction with making previously mentioned after-tax super contributions.
Be Familiar With Different Investment Options
One thing many people do not know is that super funds offer a variety of different areas where members can invest their super. The default investment for most funds is usually a ‘balanced’ option, which as the name suggests, is spread out over various investment types, including fixed interest, share market, property, and cash accounts.
However, members of most funds can choose from other options, as well as what percentage of their super they would like to put towards each option. Such options include, but are not limited to, ethical investments, high growth investments, Australian and international shares and guaranteed capital investments, which address the desires, needs, and values of most investors.