Maximising your super

Here are some powerful strategies that your Commonwealth Financial Planner will consider in helping you boost your super savings.

Salary sacrifice

This simple yet powerful strategy involves asking your employer if they will make an extra deduction from your salary and send it to your super fund along with the 9% employer contribution already being made on your behalf. For example, you may wish to boost the 9% contribution to 12 or 15%. Even making it just 10% should make an appreciable difference over a long period, and you'll barely notice the difference in your available spending money.

The benefits of this strategy include:

• It's simple, automatic and consistent - a perfect way to save
• The contributions come out of your salary before income tax is calculated, reducing the amount of tax you pay
• As your salary increases, so too will your level of contributions, boosting your super even further

 

Consider checking with your employer that by adopting a salary sacrifice strategy, there will be no reduction in the superannuation. Check also that they will not use your contributions to reduce their own.

Boost your spouse's super and gain a tax off-set

If you are a permanent employee and are married or in a de facto relationship, you can open a super account on behalf of your spouse. The government currently offers a tax off-set of up to $540 a year if you contribute to your spouse's account, provided your spouse earns less than $13,800 a year.

Split your super with your spouse

If you are married or in a de facto relationship, you are permitted to transfer your super contributions from the previous financial year over to the super account of your partner (except same-sex couples). The receiving spouse must be under age 65 and not retired. You can do this every year, after the financial year ends. Up to 85 per cent of employer and salary sacrifice contributions made since 1 January 2006 can be transferred.

Why would you do this, especially as super is tax free at retirement and there's no limit to how much you can save into super? There are several reasons:

• While super is tax free once you reach age 60, you may wish (or need) to withdraw some of it before then. Withdrawals from super before age 60 are subject to tax. If you can draw the money from two super accounts, rather than one, you could each gain the benefit of the tax-free threshold and each pay your own marginal rate of tax, potentially reducing the overall rate of tax paid by your household
• If there is a significant age gap between you and your spouse, transferring contributions from the younger spouse to the older spouse could enable you to access more of your retirement money earlier
• The age gap can be used the other way around. Transferring money from the older spouse to the younger spouse could enable you to receive more age pension. This can effectively delay the date at which your super becomes an assessable asset
• You may be able to lessen the impact of possible changes to legislation by future governments

 

This super-splitting strategy is not offered by all funds, so check with your fund.

Take advantage of the government co-contribution

To encourage you to save for your retirement, the government will match any personal after-tax contributions you make to your super with a co-contribution of its own. If you earn $28,000 or less, for every dollar you save into super the government will contribute $1.50 to your account, up to a maximum of $1,500.

The amount of government co-contribution reduces for every dollar you earn over $28,000, and ceases once your total income reaches $58,000.  If your income is over $58,000, but your spouse's isn't, consider opening an account for your spouse to take advantage of this great benefit. Talk to a Commonwealth Financial Planner if you think this applies to you.

The co-contribution scheme is also available to the self-employed.

Maximum flexibility with self-managed super

Establishing a self-managed super fund (SMSF) can provide another alternative for saving for retirement. SMSFs are funds that you control, act as trustee, and have responsibility for investment decisions, compliance requirements and legal obligations.

Before you jump in, it's important to understand the issues. Here are a few key considerations:

• Financially it's not worth doing if you have less than $200,000 in super as there are cheaper options (such as establishing a regular personal superannuation account)
• The administration and record-keeping of an SMSF is onerous, extensive and rigorously followed up by the ATO, although it is possible to get assistance with this from professional administration providers
• All trustees are legally liable for the fund.

 

Talk to a Commonwealth Financial Planner to find out whether a SMSF is appropriate for your situation.

Consolidate your super

If you've had several jobs since you started working, it's possible you have money in more than one super fund. Why pay fees on multiple accounts? Paying fees on multiple accounts can impact on the long term performance of your super. Combining several accounts into one is usually more cost effective, meaning you should have more money working towards your future. It's also easier to monitor and keep track of your super if it's in one place. Before consolidating your super, you should talk to a Commonwealth Financial Planner to understand whether there are exit fees or other disadvantages of transferring out of a fund.

TIP: If you've moved house since you started working you may have lost track of a past super account. To check whether any unclaimed super belongs to you visit the ATO SuperSeeker. You might find a handy sum to boost your super even further.

Can you save as much as you like into super?

To encourage you to save freely for your retirement, the government abolished its former limits (reasonable benefit limits) on how much you can have in super. You can now accumulate as much super as you like, and all of it can be withdrawn tax-free once you turn 60.

The only catch is that to prevent abuse of the system, the government limits how much you can contribute to super in any one year. The annual limits are:

• $50,000 for concessional (deductible) contributions, i.e. employer contributions and salary sacrifice contributions. If you're aged 50 or over, a transitional cap of $100,000 per financial year applies until 30 June 2012 – commencing in the financial year you turn 50. Any contributions in excess of either cap will be taxed at a rate of 46.5%
• $150,000 for non-concessional or after-tax contributions or $450,000 averaged over 3 financial years if you are under 65 in the financial year. All contributions over the cap will be taxed at a rate of 46.5%

 TIP: make sure you declare you tax file number on your super fund to ensure that contributions are accepted and tax rates are minimised.

Seek investment advice

Whether you're an expert or novice investor, good advice is important. A Commonwealth Financial Planner can help you identify the most suitable strategies for maximising your retirement savings.

To find out more about how a Commonwealth Financial Planner may be able to help you, or to make an obligation-free appointment with a Commonwealth Financial Planner, call 1800 241 996 or email us.

Important information. The information contained on this web page is of a factual nature only and is not intended to constitute financial product advice. It has been prepared by Commonwealth Financial Planning Limited without considering your individual objectives, financial situation or needs. You should consider its appropriateness in light of your circumstances and consider seeking professional advice relevant to your individual needs before making a decision based on this information.

Commonwealth Bank customers who wish to obtain information about Retirement Planning may do so by contacting a Commonwealth Financial Planner. Commonwealth Financial Planners are representatives of Commonwealth Financial Planning Limited ABN 65 003 900 169, AFSL 231139. Commonwealth Financial Planning Limited is a wholly owned but non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.

Superannuation and taxation considerations are general and based on present superannuation and taxation laws, rulings and their interpretation as at April 2006