Although the research shows Australians often put off thinking about super until later in life, it’s worth taking an interest in your retirement savings now – while you have the chance to do something about it.
To get you started, here are the basics when it comes to super rates in Australia: what you’re entitled to, how much you might need at retirement, and different ways to give your super a financial boost.
What is the current superannuation rate?
In Australia, employers must make contributions into your chosen super account as part of the superannuation guarantee scheme.
The rate of this contribution is currently 9.5 per cent of ordinary time earnings – a portion that is set to increase to 12 per cent in 2025. This is more than what the rate has been in the past: before the super guarantee was introduced in 1992, employers only paid 3 per cent of earnings into your super fund.
To further increase your savings, superannuation is also designed to be a tax-effective structure. Your employer’s super contribution is taxed at a concessional rate that is much lower than the tax you pay on your income. Extra money you put into your super fund can also attract tax benefits, depending on type of contributions they are.
To stay on top of your super, here are some ways to keep track of your savings:
- Check how much superannuation you currently have set aside by visiting the Australian Taxation Office (ATO) section of your online myGov account. If you don’t have a myGov account, you can set one up.
- Check how much money you should be receiving in super contributions from your employer through ASIC’s employer contributions calculator. If you think your employer isn’t paying you enough super contributions, the ATO can assist you.
- Estimate how much super you’ll have when you retire through the ATO’s superannuation calculator.
How much super do you need to retire in Australia?
How much money you’ll need for retirement depends on many things; there is no one magic number as everyone’s financial situation is different.
Some factors that impact how much super you may need in your golden years include:
- When you plan to retire – the longer you plan to work, the less super you may need. There is no official retirement age in Australia, but you can only withdraw your super when you reach your preservation age (currently between 55 and 60, depending on when you were born) and are retired.
- How much of the age pension you will receive – many retirees use their super to supplement their age pension income. You can find out more about age pension eligibility and payment rates on the Department of Human Services website.
- The standard of living you want to maintain – how much super you’ll need will depend on how much money you plan to spend in retirement on discretionary expenses like holidays, eating out and entertainment.
- Your living situation – whether you are renting, paying off a mortgage, own your home outright or are living rent-free with family will affect how much super you need.
- If you have any outstanding debts at retirement.
To give you an idea of how much you may need to retire, the Association of Superannuation Funds of Australia estimated how much retirees typically need if they want to live a ‘modest’ or ‘comfortable’ lifestyle.
According to ASFA’s figures from the June quarter of 2017, a couple living a modest lifestyle will need $34,911 a year to live on, while a couple with a comfortable living standard will need $60,063 per year. For singles, the amount is $24,270 and $43,695 respectively.
How can I increase my superannuation?
Making voluntary contributions towards your superannuation – on top of your employer’s compulsory contributions – can help give your retirement nest egg a boost while you are still earning money.
Here are four ways to increase your superannuation before you retire.
1. Make concessional contributions: put money in your fund by salary sacrificing
One way to boost your savings is to ‘salary sacrifice’ by arranging for your employer to direct some of your before-tax salary into your superannuation fund.
The advantage of salary sacrificing is any money you put into your super fund attracts a lower tax rate compared to the marginal tax rate. There is a cap, though, on the amount of money you can contribute before tax. If you exceed this limit, you will have to pay a penalty tax on your contribution.
2. Make non-concessional contributions: put money in your super from your after-tax income
You can also increase your super by putting money into your super fund from your after-tax income. Like before-tax contributions, this amount is also capped per financial year. If you are under the age of 65, though, you can ‘bring forward’ the next two years’ worth of after-tax contributions and increase the amount you contribute in a financial year.
3. Check if you are eligible for a government co-contribution
To help people with lower incomes save for their retirement, the government established a co-contribution scheme called the Low Income Superannuation Tax Offset (LISTO).
LISTO refunds some of the tax paid on concessional super contributions. To be eligible for the benefit, you must:
- have an adjusted taxable income of no more than $37,000 for the financial year
- derive at least 10 per cent of your total income from employment or your business
- make concessional (that is, before-tax) contributions to your super
4. Receive contributions from your spouse or partner
Your spouse or de facto partner can help top up your super by making contributions into your fund. As an added benefit, if you earn no income or a low amount of income, your partner can claim a tax offset for the contributions they make.
Another way to boost your super is to arrange for ‘contribution splitting’ with your partner, where some of their super contributions is placed into your super account. Contribution splitting is allowed so long as you are under the preservation age, or between your preservation age and 65 years and not retired.
To help you make an informed choice about super contributions, ASIC’s calculator estimates what type of contribution will give you the biggest boost towards retirement.
What is a SMSF?
A self-managed superannuation fund (SMSF) is your own personal super fund, regulated by the ATO, which offers you hands-on control over how your money is invested.
Members of an SMSF are trustees, responsible for developing the fund’s investment strategy, keeping detailed records and organising an independent audit for the fund. Trustees are liable if the fund doesn’t meet the government’s statutory and regulatory super requirements.
Can I accumulate more money in an SMSF?
There is no one answer as to whether you can accrue more money in an SMSF compared to a retail or industry super fund.
The general wisdom is the more super you have, the more cost-effective an SMSF is to run. ASIC recommends ensuring you have enough start-up money to make an SMSF a viable option, as SMSFs can come with more fees for accounting, legal work, audits and tax advice.
If you would like more advice, you can hire the services of a financial planner or accountant to help you. The ATO also has educational videos on their website about setting up an SMSF in Australia.