Australia has an excellent system that requires employers to pay their staff superannuation, so they have money to access in retirement. These funds grow throughout your working life, but if you top them up yourself, you’ll find you can either retire earlier or live more comfortably when you step away from work.
The added benefit of proactively topping up your super is that you can use it as a strategy to minimise tax. Whether you are just starting your career or approaching retirement, it’s never too late to look for ways to grow your superannuation and prepare yourself for a more financially secure future.
How to grow your super in 2023
1. Consolidate your funds
The first step to proactively grow your super is to roll all your funds into one.
It is not unusual to have money sitting in accounts you no longer contribute to. This is a problem because you will be paying fees but not adding to the fund. If you have money in several accounts, you’re losing out.
This year, choose one fund and make sure your employer is paying directly into it (you have the right to nominate your own super fund). Your next step is to let this fund know you’d like help to find your other super accounts and bring the money together in one place.
Many people have super funds that they aren’t even aware of. Don’t make this mistake; it is your money after all.
2. Reconsider your superannuation fund
As mentioned, you don’t have to use the super fund your employer defaults to.
Not all funds are created equal, and there may be potential to achieve better results by switching to a different provider. Reach out to your financial advisor, who can conduct some analysis and explain your options.
You can double-check your super payments
3. Double-check your employer is paying you correctly
Paying staff superannuation is a requirement by law, but many companies fail to pay super correctly for a variety of reasons.
You can double-check your super payments by:
– Checking your payslip
– Checking your MyGov account
– Contacting your super fund
Your employer must pay your super once a quarter although they may do so more frequently. Check the rate is correct as well; it should be at least 10.5 per cent of your base income.
The rate is set to rise gradually over the next few years. By July 2027, it will be 12 per cent.
If you notice your super fund has not been topped up at least quarterly and at the right amount, speak to HR or reach out to an employment lawyer.
4. Contribute extra to your super
There are three ways you can contribute extra funds to your superannuation:
- Salary sacrifice: When you salary sacrifice, you ask your employer to contribute more than the standard amount to your superannuation. This strategy can be beneficial because it lowers your taxable income. You won’t get as much in your pay packet but the money is still yours to keep in retirement.
- After-tax contributions: The government allows you to voluntarily contribute to your super at any time. This works in a similar way to salary sacrificing; you can claim a tax deduction up to an annual limit of $27,500 a year. As explained on the ATO website, the cap may be higher if you did not use the full amount of your cap in earlier years.
- Spouse contributions: Your spouse can contribute to your superannuation at any time. This can be helpful if you are not working for a stretch of time or don’t earn a high income.
Conditions apply, but as a general guide, if you earn under $37,000 and your spouse contributes up to $3,000 to your super, they will be eligible for a $540 tax offset.
Visit the Australian Taxation Office website or contact us to learn more about how super-related tax offsets can apply to you.
5. Transition to a self-managed superannuation fund (SMSF)
The final and perhaps most effective way to grow your superannuation is to transition to a self-managed super fund, also known as an SMSF.
Once you have a certain amount in your super (usually more than $250,000 to $300,000), self-managing makes a lot of sense, firstly because you will pay a flat rate in fees rather than a percentage of the money you have in your account.
When you self-manage, you will have greater flexibility and choice around:
– Where your retirement savings are invested
– What you invest in (e.g. you can invest in property through your self-managed superannuation fund)
– Who you invest with (e.g. you and your partner can combine your funds into one)
Your financial advisor will also help you to explore the use of your SMSF as a tax minimisation strategy.
There is a small amount of work involved with setting up a self-managed superannuation fund and you need to be proactive about managing it. However, if you partner with a committed financial advisor, you’ll be able to implement strategies that lead to impressive growth.
Want to grow your superannuation in 2023? Talk to Landen today.