Four ways to boost your super this financial year

Oh super! That topic so many of us ignore, secure in the knowledge our employees are paying our superannuation guarantee into our retirement nest egg, and assuming that it will one day fund it all. 

But here’s the thing - no one should ever be complacent about their finances, and planning ahead can mean all the difference between a champagne budget or goon restrictions in retirement. (No judgement on the wine bags, there are some good ones out there!)

If this financial year is the year you want to take charge of your superannuation, then there are plenty of things you can consider. Here’s some basics to kickstart your process.

1. Where’s your super?

Over time, you may have accumulated a few funds. Remember those jobs behind the fast food counter back in high school and then your first job in your chosen career? Chances are you picked up a new super account every time you changed jobs early in your life.

The tedious days of filling out paper forms to send to super providers to rollover funds are behind us (though you can still do it that way if you prefer). It’s as simple as logging into your Australian Taxation Office (ATO) account, selecting “Super”, then “Manage”, then “Transfer super” to roll funds into your preferred account.

If you only want to transfer part of the balance, you’ll need to speak to your super providers instead to make arrangements.

Before you consolidate though, a word of caution. Check what insurance you might have in the different accounts and whether or not it might actually be worth keeping more than one account. I’ve heard horror stories where investors have consolidated, needed to make a claim shortly thereafter for medical conditions only to discover they should have maintained an account they closed.

For most of us though, consolidating to one account means saving on fees and maximising on returns.

2. Review your provider

Super is a long-term investment and providers are investing for 20+ year timeframes. 

Keeping that in mind, it is helpful to take a closer look at your super provider and make sure the management and fees actually meet with what you need and what your goals are. Long-term performance over market cycles is also useful to look into.

You can compare your super fund to similar ones using tools like SuperRatings, as well as find out the top performers over different periods of time.

3. Check your portfolio has the right mix of growth and defensive assets for your needs and stage of life

Back when you set up your account with your provider, you may have selected an investment mix option or perhaps gone with a default option. There are a variety of ways your superannuation can be managed these days and you should check your portfolio is in the right option for you.

If you want to get your hands dirty and pick shares and funds, many providers offer DIY options with varying levels of control. If you prefer to let the experts do the work, you can select pre-mix options.

While providers may have their own terminology, generally speaking the pre-mix options are Defensive, Balanced, Growth and High Growth which represent the levels of risk and growth allocations. 

A typical balanced portfolio might be allocated towards 70% growth assets like equities and 30% defensive assets, while high growth might have 90% growth assets and 10% defensive assets.

These pre-mixes consider a likelihood of loss and recovery, with those oriented more towards growth usually suitable for those with a longer investing timeframe, as they have more time to recover and grow, as well as those geared more defensively towards those in retirement.

It helps to get advice on your individual needs as to which one is right for you but as a general guide, if you are in your 20s, the Defensive mix is probably not the right option for you, whereas if you are in retirement, High Growth might be too volatile for your needs.

4. Contributing extra to your super

When it comes to super, you can contribute beyond your Superannuation Guarantee (12% of your earnings paid by your employer to your super fund) within certain guidelines. There are two key types of contributions that can be made to your superannuation. 

Rules can change and there are eligibility requirements so make sure to check the fine print at ato.gov.au and consider having a chat with an expert about suitability before you go ahead with any of the below.

Concessional contributions

These payments to super come from your pre-tax income and include Superannuation Guarantee payments. You could contribute up to $30,000 this financial year.  A 15% tax applies to these contributions, compared to your marginal tax rate, unless you earn over $250,000 per annum where an additional 15% tax may apply. 

If you have unused cap amounts from previous years, you might be able to carry them forward from up to five previous financial years. Bear in mind that previous years have had different caps. 

Those who earn up to $37,000 per year may be eligible for a low income super tax offset payment of up to $500 (this is automatically applied if your super fund has your tax file number).

Some may also consider contribution splitting to help boost a spouse’s superannuation. This involves applying to your super fund using a Superannuation contributions splitting application after the end of the financial year. 

If you want to claim a tax deduction on any of the split, you’ll need to notice the fund of this intention before applying – please note, it is up to your superannuation fund whether or not to allow the contributions split.

Non-concessional contributions

These are payments you make to your superannuation after you have paid tax and you may be able to contribute up to $120,000 this financial year, or “bring-forward” three years’ worth of non-concessional contributions which would allow you to contribute up to $360,000. 

Bear in mind that you can only make these contributions if your total superannuation balance is below the general transfer balance cap of $2 million (and the contributions you make cannot push your balance above this cap).

If you make a non-concessional contribution of $1,000 to your super and your income is below $62,488, you may be eligible for a government co-contribution of up to $500 to your super.

You may also choose to contribute directly to your spouse’s superannuation as part of their non-concessional contributions, which may entitle you to a tax offset of up to $540 a year if your spouse’s income is below $40,000.

The bonus contribution type – downsizer contributions

While technically a non-concessional contribution, a downsizer contribution is a once-off contribution that doesn’t count in the usual cap for non-concessional contributions. 

If you are aged 55 years or older and are selling your home, you might be able to contribute up to $300,000 from the sale proceeds into your super fund. 

If you are selling with a partner also aged above 55 years, both parties can make downsizer contributions into their superannuation funds – you can’t contribute more than the total proceeds from selling your home though.

Super and investing

Superannuation is considered a tax efficient means for most people to save for retirement, but of course, it isn’t your only option. For some, other investment vehicles might better suit them. 

Whatever you choose, take the time to do the research and seek out expert advice where you need it. Happy investing!