Opinion
5 things you need to know to maximise your super
Nicole Pedersen-McKinnon
Money contributorThe superannuation sands are shifting yet again, courtesy of decisions by both the former and – possibly – the new federal government.
Having said that, we don’t yet know whether paid parental leave will soon attract super payments on top.
However, new financial services minister Stephen Jones says: “We want to do it.” It will be contingent on the government’s other financial commitments.
New financial services minister Stephen Jones says the government wants to introduce the payment of superannuation on top of paid parental leave.Credit:Alex Ellinghausen
Still, there has been, and will be, several significant changes to super at the end of this month. You need to be aware of them... and act accordingly.
Need-to-know 1.
Several years ago, the Coalition government enacted what is formerly known as a carry-forward of unused concessional super contributions – unofficially, a mop-up to the top-up scheme.
While you could only contribute $25,000 to super a year before tax, until last tax year, and $27,500 from this financial year, you can use rather than lose a rolling five years’ of “spare” contributions.
This has been available since the 2019 tax year. So, right now, you could make super contributions to the maximum for four years: $102,500 (three lots of $25,000 and one of $27,500).
Remember, these maximum amounts include all super contributions from your employer, any salary sacrifice contributions you have made, and any from your own pocket for which you have claimed a tax deduction.
To qualify, your super balance must have been less than $500,000 on June 30, 2021.
Don’t overpay into your super fund, or else you will face tax on the excess at your top marginal rate.
Need-to-know 2.
A few years ago, eligibility for a spouse contribution was significantly expanded. This is a wonderful opportunity for a family who may have young children, where one person is spending less time in paid employment.
The higher earning spouse pays in $3000 after-tax to their partner’s super, and could receive a tax offset of up to $540 for their trouble.
So, the super of the person working mostly at home swells by $3000 (less 15 per cent contributions tax) – and the payer gets a tax discount. This works not just for people earning less than $13,800 a year, as it used to, but now all the way up to income of $40,000 (the low earner). Adopting this strategy is clever tax and wealth planning each financial year. Make a contribution before June 30 and slash your tax bill.
Need-to-know 3.
This one has been around for a while, but the co-contribution to super is so valuable as to always be worth a mention.
Here, a $1000 after-tax contribution into the fund of someone earning less than $56,112 a year will net them an up to a $500 co-contribution from the federal government that goes directly into their fund.
Once again, you can take advantage year after year, so don’t delay if it’s relevant this tax year.
Note that super funds are telling members they have until June 27 for BPay payments to go into their accounts to meet the end-of-financial-year deadline.
Need-to-know 4.
From July 1, the ridiculous rule which requires someone to earn $450 a month from one employer before they qualify for super contributions will be scrapped.
The hurdle previously meant people with several jobs might miss out. It particularly disadvantaged women working casually, perhaps while raising children.
Make sure your employer is aware of this one because it may well mean that, suddenly, you need to register a super fund with them. Get the paperwork done now, so you can start getting paid retirement savings from the start of the new financial year.
If you are under 18, the same rules apply. Workers still must work more than 30 hours a week to be eligible.
There is more good news on the super payment front, too.
Need-to-know 5.
The compulsory super guarantee rate is increasing by 0.5 percentage points to 10.5 per cent. It will continue to rise before hitting 12 per cent in 2025.
Make sure your employer is aware of it, or you adjust your payments, if you work for your own company.
Not just large, but little bits of super, all add up and get you closer to a comfortable retirement.
Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me. Follow Nicole on Facebook, Twitter or Instagram.