If you want to retire comfortably your employer’s 9.5% contributions may not be enough to build your nest egg. Or if you are self-employed you need to be making the contributions yourself or you will be disappointed with your nest egg (or lack of) when you reach retirement. By being smart about your super, you will boost the amount of super you have when you stop working. The key is to start now so you can relax later.

Super consolidation

Most of us have more than one super account, often because of job changes. Or we have ‘lost’ track of super accounts we have accumulated over the years. Instead of paying double or triple the costs you need to, you could be better-off keeping your money in one account where it can compound into more retirement dollars.

Super guarantee (SG)

This is the 9.5% of your earnings that your employer must pay from your pre-tax salary. It is currently proposed that this will increase until it reaches 12% in 2025-26.

Pre-tax contributions

Anything you put into your superannuation from your pre-tax income is known as a concessional contribution. If your annual salary is less than $300,000, you’ll only be taxed 15% on this, provided that you do not exceed annual limits set by the government. For the current year, these annual limits are $30,000 if you are under age 50 and $35,000 if you are aged 50 or over.

After-tax contributions

A payment into your super from your after-tax income is called a non-concessional contribution. This money is not taxed as you have already paid tax on it at your normal rate. There is a $180,000 limit per year, for the current year, on the amount of after-tax contributions you can make.

Salary sacrifice

How about taking home less pay, in return for having more in your super? Ask your employer if you can put more of your pre-tax salary into your super, above the 9.5%. Again, you’ll only be taxed 15% on this amount. Salary sacrificing makes sense if the tax rate you’d otherwise pay on that income is higher than 15%.

Government co-contributions

If you earn up to $34,488 a year and you put some after-tax money into your super, the Australian government can add up to $500 tax free to your account. That $500 amount decreases by 3.33c for every dollar that your annual income is above $34,488 (in 2014/15). If your annual income is $48,488 or more, you will not be entitled to a co-contribution payment.

Low income super contribution (LISC)

If you earn $37,000 or less a year and put some pre-tax money into your super that year, you may be able to get a payment into your super of up to $500 per year from the Australian government. You don’t even have to apply for this, as the Australian Taxation Office will organise that payment on receipt of your tax return.

Self-employed?

You can make an after-tax contribution and claim it as a tax deduction. Also, that amount will only be taxed at a 15% rate. You’ll need to fill in a Notice of intent (NOI) form before you submit a tax return. Article published February 2015 Sources: www.amp.com.au www.moneysmart.gov.au Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, Designed Wealth does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, Designed Wealth does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.