Boost your super in the lead up to retirement

As you approach retirement, it could be a good idea to consider giving your super a boost.

If you’re looking at retiring in the near future, your savings will soon turn into an income stream. So the more you’ve saved, the better. Here are some ways you could top up your retirement savings.

1. Make the most of after-tax contributions

Making personal contributions to your super from your after-tax money can be one way to boost your super. These are known as non-concessional contributions and, while there is no tax deduction available, an annual cap of $100,000 applies(i). If you’re under 65, though, depending on your overall super balance, you may be able to bring forward up to two years of this cap, allowing you to contribute a total of $300,000 at a time. For more information check out the ATO website.

If you have super assets of $1.6 million or more as at 30 June of the previous financial year, you can’t make after-tax contributions to your super or you may be penalised.

2. Consider tax-effective contributions like salary sacrifice

If you’re an employee, making voluntary contributions from your before-tax salary to your super (also known as salary sacrifice) could not only help you boost your super but also potentially reduce the amount of tax you pay. That’s because salary sacrificed contributions are taxed at 15%(ii) when received by the fund, which is potentially lower than your personal marginal tax rate(iii). These types of ‘concessional’ contributions are capped at $25,000 per financial year, including ‘superannuation guarantee’ contributions from your employer..

And if you’re self-employed you don’t need to miss out. You can make personal contributions to your super (using your own cash) and claim a personal tax deduction of up to $25,000 as a concessional contribution(iv). This option is also available to employees so they can choose between a salary sacrifice arrangement and personal deductible contributions.

3. Review your investment options

While the contributions you make may have a significant impact on your super balance when you retire, the investment returns generated by your super fund also matter, as well as how long your money was invested. Check whether your super is invested in appropriate options based on your needs and financial circumstances such as age, goals and your level of risk tolerance. If you’re unsure, contact your super fund or a financial adviser for guidance. It’s worth reviewing your investment options regularly.

4. Consider spouse contributions

In some circumstances, you may be eligible for a tax offset if you make an after-tax contribution to your spouse’s super (husband, wife or de facto) and satisfy eligibility criteria. If you make after-tax contributions to your spouse’s super fund, you may be able to claim an 18% tax offset on a contribution of up to $3,000 when completing your tax return at the end of the yearv.

From 1 July 2020, to receive a spouse contribution your spouse must be under the age of 67, or if your spouse is aged 67 to 74 they must meet the requirements of the work test. The work test broadly requires that they are in paid employment (or self-employment) of at least 40 hours within a 30-day period.

To qualify for the full tax offset, which works out to be $540, your spouse’s income must be $37,000 or less. Their income must be less than $40,000 for you to receive a partial tax offset.

5. Look into downsizer contributions

You may be able to top up your super with the proceeds from the sale of your home. If you’re 65 or over, you can make an after-tax contribution into your super account of up to $300,000 from the sale proceeds of your home if you have owned the property for at least 10 years. Couples can contribute $300,000 each, regardless of their work status, super balance or history of contributions.

i https://www.ato.gov.au/individuals/super/in-detail/growing-your-super/super-contributions---too-much-can-mean-extra-tax/?page=3

ii https://www.ato.gov.au/Individuals/Super/Growing-your-super/Adding-to-your-super/Tax-on-contributions/

iii https://www.ato.gov.au/rates/individual-income-tax-rates/#Residents

iv https://www.ato.gov.au/individuals/super/in-detail/growing-your-super/super-contributions---too-much-can-mean-extra-tax/?page=4#Super_for_the_self_employed

v https://www.ato.gov.au/Individuals/Income-and-deductions/Offsets-and-rebates/Super-related-tax-offsets/#taxoffset

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