New legislation is set to boost the government superannuation guarantee from 9 per cent at present up to 12 per cent within the next decade. These changes are set to have a big impact on your retirement fund, but there are plenty of other things you can do in the meantime to increase your super balance.
As of July 1 this year, your superannuation contributions are set to increase. Under the Superannuation Guarantee (Administration) Amendment Bill 2011, the superannuation guarantee rate will slowly increase from 9 per cent to 12 per cent between now and 1 July 2019:
| 2013-14 | 2014-15 | 2015-16 | 2016-17 | 2017-18 | 2018-19 | 2019-20 |
| + 0.25% | + 0.25% | + 0.5% | + 0.5% | + 0.5% | + 0.5% | + 0.5% |
| 9.25% | 9.5% | 10% | 10.5% | 11% | 11.5% | 12% |
The federal government estimates that with these new super guidelines, “An average worker aged 40 will receive a 15 per cent increase in retirement savings, and an average worker aged 30 will receive a 24 per cent increase.”
This is all good news for employees as it means you’re likely to retire with more money in your nest egg. On an average $60,000 salary, for instance, this increase from 9 per cent to 12 per cent translates to an additional $1,800 per year being added to your retirement fund.
Still, there are plenty of other things you can do to supercharge your superannuation balance:
Salary sacrifice
Under a salary sacrificing arrangement, you’re allowed to package up before-tax super contributions as part of your salary package. This has the impact of reducing your taxable salary and therefore, the amount of income tax you’re required to pay.
For instance, if you earn $60,000 you must pay income tax on that full amount, which is currently 34 per cent as of July 1, 2013 (including Medicare levy) for income between $37,000 and $80,000.
If you salary sacrifice $1,000 into your superannuation fund, you are only required to pay income tax on $59,000. Your $1,000 contribution subject to a 15 per cent flat concessional tax rate ($150) instead of your 34 per cent income tax rate ($340). This allows you to save an extra $190 towards retirement in your super fund!
Government co-contributions
If you earn less than $61,920, then your super fund could benefit from free money from the government! The government co-contribution works like this:
- you make an after-tax super contribution of up to $1,000
- the federal government matches it, paying $1 for every $1 you contribute
- the co-contribution is not included as income in your tax return
- the co-contribution is not subject to tax when it is paid to your super fund
To be eligible for the maximum government payment of $1,000 per financial year, you must earn at least 10 per cent of your income from a job, and earn less than $31,920 per annum. If you earn more than $31,920, your entitlement reduces by 3.33¢ for every dollar over $31,920 you earn, and eligibility cuts out at $61,920.
Combine your super funds
If you’ve worked in more than one job, there’s a chance you’ve got more than one superannuation fund. Each super fund you have charges account keeping fees and charges, which can chew through up to $500 annually.
So, one of the easiest ways to supercharge your super profits is to roll all of your accounts into one: In doing so, you’ll streamline your super situation so you only have one account to deal with, and you’ll claw back hundreds of dollars a year in needless fees. The government estimates that millions of dollars are currently sitting in neglected or lost superannuation funds, so be sure to visit SuperSeeker or AusFund to check whether you’ve left any super funds behind.
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