Rebuilding your superannuation

Super savings are the best structure for funding retirement, however as a result of market movements and the financial hardship caused by COVID-19, super balances have taken a hit.

There are a few strategies that could help to boost retirement savings between now and retirement. The sooner you start, the more chance you’ve got to ensure you can get your super savings back on track.

Sacrifice pre-tax salary to super: This may be appropriate for those who have sufficient cashflow to divert some of their pre-tax salary to super rather than as take-home pay. It doesn’t need to be a large amount to start and the amount can be further increased in the future once things are really back on track. Salary sacrifice contributions are generally taxed at the concessional rate of up to 15 per cent, rather than the marginal rate which could be up to 47 per cent.

Government co-contribution: For those that meet the requirements and make personal (after-tax) contributions of up to $1,000, the Government will also contribute up to $500 into super accounts. The amount will vary based on income and the total annual personal contributions made. As a general rule, in 2019-20 the maximum co-contribution of $500 is available to those who contribute $1,000 and earn $38,564 or less, and a reduced amount may be received if they contribute less than $1,000 and/or earn between $38,564 and $53,564.

Make a spouse contribution and receive a tax-offset: Anyone who makes an after-tax contribution into their spouse’s super account, and they earn less than $40,000, may be eligible for a tax offset of up to $540. To qualify for the full offset of $540 in a financial year, $3,000 or more must be contributed into the spouse’s super account and the spouse must earn $37,000 or less. A lower tax offset may be available if the contribution is less than $3,000 or the spouse earns more than $37,000 but less than $40,000.

Make catch-up concessional contributions: Anyone who hasn’t fully utilised their annual concessional contributions (CC) cap since 1 July 2018 may have accrued ‘unused’ CCs that could enable them to make larger contributions in a future year. Unused CCs can be carried forward for up to five years.

More than ever, seeking financial advice is critical. To discuss your superannuation, find out if these strategies are right for you and to understand more about the rules and eligibility conditions, speak to your wealth adviser.