Learn how understanding superannuation, boosting contributions, and leveraging tax advantages can help you build a solid financial future.
Super’s primary purpose is to offer Australians a reliable source of income after they finish working, reducing reliance on the Age Pension.
Understanding how super works is essential for financial security, as it represents a significant source of retirement income for most Australians. With knowledge of contribution rates, tax benefits, and additional saving options, Australians can make the most of this system to secure their future.
Current super rates
As of 2024, the super rate is set at 11.5 per cent, meaning employers must contribute 11.5 per cent of an employee’s earnings into their nominated super account. This rate is scheduled to increase to 12 per cent by July 2025, boosting the growth of employees’ retirement savings over time. This increase can significantly impact an individual’s retirement nest egg, particularly over a long career.
Retirement planning essentials
Effective retirement planning in Australia centres around the superannuation system – a mandatory retirement savings scheme. Your employer contributes 11.5% of your salary to your superannuation fund, with opportunities to make additional voluntary contributions. Or, if you’re self-employed, you have the option to make your own contributions.
The ASFA Retirement Standard provides benchmarks for retirement spending, helping Australians plan for different lifestyle levels. Your personal circumstances, including home ownership status, health requirements, and location, will influence your specific retirement and super needs.
Regular engagement with your superannuation fund through online portals allows tracking of progress toward retirement goals. Many super funds offer retirement calculators and planning tools to assist members in projecting future balances and required contribution levels.
To prioritise saving for retirement, consider setting up automatic contributions to your retirement or super accounts. This ensures consistent growth over time and makes saving easier by automating the process. Additionally, explore various investment options to enhance your savings.
Voluntary contributions
Beyond compulsory employer contributions, employees can make additional voluntary contributions to their super accounts. Voluntary contributions, whether through salary sacrifice or post-tax contributions, can further boost retirement savings. These extra contributions benefit from the concessional tax rate (of 15%, which is typically lower than personal income tax rates), making them a smart option for Australians seeking to maximise their retirement savings.
Government co-contributions
To encourage low-income earners to save for retirement, the Australian government offers co-contributions for individuals who make personal contributions to their super. Based on income thresholds, eligible individuals can receive a co-contribution of up to $500, incentivising them to save more effectively for retirement.
These payments are made automatically if you have a tax file number.
Super tips:
- Look into salary sacrifice arrangements to boost contributions.
- Consolidate multiple super accounts to reduce fees.
- Regularly review the investment options within your fund. Most super funds offer a range of investment options, from conservative to high-growth. Reviewing and adjusting your investment strategy to match your risk tolerance and retirement timeline can help optimise your returns.
- Making additional after-tax (non-concessional) contributions can help you grow your super balance without exceeding concessional caps.
- Track down any lost super: Just under $17.8 billion of lost or unclaimed super exists in forgotten accounts in Australia. Use the ATO’s online portal (via MyGov) to track down and consolidate any lost super.
- Tax offset: Contributing up to $3,000 to your spouse’s super could give you a tax offset of up to $540, adding both tax benefits and super growth.
- Stay on top of changes. Superannuation rules, fees, and investment performance change over time. Regularly reviewing your super fund’s performance and fees ensures your super is on track for retirement.
Check out this super calculator to help you plan better for the future:
Maximising your superannuation requires a proactive approach, from salary sacrifice to making after-tax contributions and consolidating accounts. And it’s never too early to start doing many of these things to ensure your future is what you want.
If you need help financially planning for your future, contact one of our experts today.
