Superannuation or ‘super’ is a way to save for the future and likely to be one of your biggest investments. It’s an investment in your future, a ‘tax structure’ with highly favourable tax rates, designed to encourage you to save for your retirement and help support your lifestyle when you stop working. For many Australians, it is the key to a secure and financially independent retirement.
How does your Super Grow
Three things primarily contribute to the growth of your super;
- Employer Contributions – Super is partly compulsory in that employers must contribute the standard rate of their employees’ salary into a super fund
- Investment Returns – Your money doesn’t sit idle – it’s invested. Your account balance will fluctuate but over time it should grow
- Personal Contributions – You can put money into your super yourself.
As super is a long term investment where all earnings are reinvested and any returns compounded, the earlier you begin making contributions, the more effective your super will become in retirement.
How can we help?
We provide advice on the most appropriate super platform and level of super contributions for you. We can review your current superannuation in relation to your goals and individual circumstances as well as the insurances held inside the super fund. Once we have an understanding of this, we can advise you on appropriate strategies to help you achieve your financial goals.
As you get closer to retirement, the importance of your superannuation becomes much clearer. You’ve got some big decisions to make which can affect how and when you can get access to your super.
- Are you ready to completely retire from the workforce?
- Do you want to reduce to part-time work?
- Do you want to take some or all of your super as a lump sum?
- Will you qualify for Centrelink benefits, such as the age pension?
We can help you understand your options including boosting your super while you are still working. We’ll look at a range of strategies with you like a ‘Transition To Retirement’ strategy, Contributions and Salary-Sacrificing.
Transition To Retirement
Some people look at reducing work hours and drawing some income from their super before they fully retire. A Transition To Retirement (TTR) strategy works by taking advantage of the different tax rates inside and outside super. If you’re looking to boost your super this strategy involves salary sacrificing some of your income into your super account and restoring your take-home pay to it’s previous level by drawing an income from an account-based pension or restricted income stream. TTR is only available if you’ve reached preservation age and is particularly beneficial for those over 60, because then you receive your pension tax-free. We can provide advice on a ‘Transition To Retirement’ strategy for you and help you develop a plan specific to your circumstances, taking into consideration tax implications and superannuation laws or Centrelink rules that will apply to your situation.
You can also grow your super by making one-off contributions from your after-tax income. The Federal Government also offers incentives and financial assistance to help you grow your super e.g. Government Co-Contributions and Spouse Contributions.
Salary sacrifice involves drip feeding regular amounts into your super from your gross earnings (your pre-tax income). Salary sacrificing can make a surprising difference over time. There are limits on the amount you can salary sacrifice each year depending on your age and it’s important to remember that your employers’ contributions count towards your pre-tax contribution limit. We can provide advice on a salary sacrifice strategy for you taking into consideration tax implications and current superannuation laws.
When can you access your Super?
There are two things that combine to determine when you can get access to your super:
- meeting the condition of release
- your date of birth
To give your super time to grow, the funds are ‘preserved’ throughout your working life. This means that generally you can’t get access to your super until you meet a ‘condition of release’. For most people the condition is retirement, once you’ve reached your ‘preservation age’ which is determined by your date of birth. Alternatively, you can get access to your super simply by reaching age 65. When you’ve met a ‘condition of release’, there are 3 things you can do with your hard-earned super money
- Leave your savings in super
- Withdraw your money from super as a lump sum
- Convert your super into a retirement income stream
The tax and Centrelink implications of these options differ greatly, so it’s critical that you seek professional advice before taking action. Implementing a financial plan well before you retire can help minimise your future reliance on the age pension (while still maximising your entitlements) and give you peace of mind about your financial security.
What’s your retirement look like?