Managing Your Superannuation

Factors to take into consideration for your super.

It is important to pay attention to the details of your super fund to make sure that you get the best out of it for your retirement.

Whether you are choosing your super for the first time or thinking about changing your super because you’re unhappy with it, the following are factors to take into account.

Determine if your super fund is underperforming.

The government is making this much easier for you. Under the new changes proposed in the budget, MySuper products will undergo an annual performance test. If a fund is underperforming then they will need to inform their customers, and if they continue to underperform two years in a row, then the super fund will be unable to take on new customers. Before this scheme entirely rolls out, you should try to look at the long-term performance of a superfund and how it compares to other ones.

Fees

The fees for different super funds can depend on the returns that they will provide. For example, if a super fund has higher growth investment options and higher returns, then they will have higher fees. You should evaluate whether you are willing to pay higher fees or if this disproportionately impacts your current income.

Insurance cover

If you are changing your super, consider any insurance linked to your fund. You might lose this cover if you switch. On the other hand, when choosing your super, ask whether you will have insurance benefits.

Super for self-employed individuals

It is not necessary for you to pay super to yourself, but it might help you feel more secure about your finances during retirement.

Contributions you make to your super will only be taxed at 15%. Depending on which tax bracket you fit into, this might be a concession compared to your usual tax rates. Additionally, investing your super will most likely yield a higher return than if you put your money into a bank savings account.

You may be able to contribute to your pre-existing super fund after becoming self-employed. All you need to do is provide the fund your tax file number (TFN) so that your contributions can be added to the fund. Alternatively, you can choose a new fund.

There are two ways you can contribute to the fund which are dependent on how you receive income:

  • Wage: Make regular transfers to the super fund from your pre-tax income
  • Income from business revenue: Transfer lump sum amounts when there is sufficient cash flow

If you make contributions to the super fund from your pre-tax income, then you can claim tax deductions for them. Your overall taxable income is reduced as well. Make sure you complete a ‘Notice of intent to claim’ so that you receive this deduction.

There are limits to the amount of money you can contribute to your super every financial year:

  • Up to $25,000 in concessional contributions (from pre-tax income, so you can claim a deduction)
  • Up to $100,000 in non-concessional contributions (from after-tax income)

As an example, employers contribute a minimum of 9.5% of an employee’s earnings to their super – if you are not sure how much to contribute, this could be a starting point.

If you are a low-income earner, then you may meet the eligibility criteria to receive government super contributions.

Although it may be difficult to make super contributions when self-employed, consider starting off the process so that when you are in your retirement period, you have some financial security.