7 strategies for growing your super fund
Have you been doing the numbers and panicking a little recently?
If your super fund is a little ‘light’ as you start to think ahead to your golden years, you’re not alone.
Millions of Australians are reviewing their retirement plans. We have been taught to believe that the money that flows into our super fund (equivalent to 9.5 per cent of our salaries) will look after us when we retire.
But many Australians are finding out that the numbers simply aren’t adding up. We’re living longer; many of us have more lavish lifestyles and higher expectations; the cost of healthcare and utilities is rising dramatically; and suddenly those golden years aren’t looking so shiny.
The superannuation guarantee (SG) is scheduled to climb in increments until July 2025 (more about this below) – but this is unlikely to be enough to cover the shortfall.
The Association of Super Funds of Australia currently estimates that around $545,000 is required as a healthy average balance to retire on. This figure would be more if you need to pay rent.
Unless you are supplementing your super employer contributions with money from other sources, it is likely that you’re in a similar boat to over half of Australians, who will be struggling to meet this requirement.
That spells trouble in your later years.
So it’s important to consider ways of fattening up your fund in your remaining working years so that it’s better positioned to look after you and your loved ones.
How can you do that?
You’re probably familiar with a few of the ways that you can swell your fund – but there may be a few you haven’t considered…
Note that the following information is of a general nature and should not be considered to be advice specific to your situation. You should always consult a qualified financial advisor when making changes to your superannuation contributions or structure.
1. Employer contributions
Get the obvious one out of the way.
If you are an employee over the age of 18 earning more than $450 per month, your employer must pay the equivalent of 9.5 percent of your 'ordinary time earnings' into your super fund.
These compulsory contributions are called Superannuation Guarantee contributions and they will gradually rise to 12 percent by July 2025.
These earnings include:
Over-award payments
Bonuses
Commissions
Allowances
Some paid leave
For every $10,000 that you earn, it equates to $950 into super. Your employer must pay this in once a quarter at least – most will pay more often than that.
As a contractor, if you’re paid mainly (or wholly) by the hour, your employer is still obliged to pay the 9.5 percent into your super.
There is not much you can do with this in terms of topping up your super – other than working longer hours, getting a second job, or pushing for a salary increase.
The equation is quite simple: the more you get paid the more goes into your super!
2. Salary sacrificing
By voluntarily electing to pay a larger proportion of your salary into your super fund, you can boost it AND receive tax benefits.
This is called ‘salary sacrificing’ or ‘concessional contributions’ and it is a practice that is looked upon favourably by the Australian government.
It needs to be arranged through your employer so that the amount is automatically deducted from your salary.
Anything you pay into your super fund under this method is calculated before income tax and after only the 15 per cent super contributions tax.
For individuals other than low income earners, this means that you get to keep far more of your money from the taxman!
3. Spouse super contributions
Does your spouse or partner work part-time? Do they earn a relatively low salary? Are they out of work or a stay-at-home parent?
If so, it might be beneficial for you both if you contribute to their superannuation fund.
For professionals whose spouse or partner has a super fund that is not growing at all or very little, this can create problems in retirement.
One way to address this is to contribute some of your own money to their fund and thereby claim tax offsets.
While the regulations on this do change, the tax benefits are accessible to couples who are both Australian residents and you are:
Able to make an after-tax contribution to your spouse’s super account (who is under 65 and receives under a certain income – check the latest limits here)
Married or in a de facto relationship where you are living together
4. Personal tax-free contributions
Another tax-friendly way to boost your super fund is to make ‘non-concessional contributions’.
These are lump sums paid into your super account. They are tax-free because they are considered to be savings from income that you have already paid tax on. It is different to salary sacrificing, which covers contributions made before tax.
Just arrange with your super fund to pay in. It can be on an ad hoc basis and can usually be arranged directly through your bank account (by BPay or cheque).
Again, non-concessional contribution limits do change, so check the latest guidelines on the ATO website.
5. Co-contribution
The co-contribution scheme is an excellent way to boost your fund if you’re considered a low or middle-income earner.
Making an extra (after-tax) contribution to your fund triggers a tax-free contribution from the Australian government. This is paid automatically after lodgement of your tax return, if you have provided your Tax File Number to your super fund.
This can be especially effective for low-income earners who start early and contribute over many years to accumulate the extra benefits.
The amounts and limits of these contributions change over time but check the ATO’s superannuation pages for the latest regulations and eligibility guidelines.
6. Rollover and save
At present, there are almost three superannuation accounts per Australian of working age. Clearly, many Australians have more than one super fund.
It’s quite easy to forget about your super and let it tick over, not doing much.
Get proactive with it. Understand the super funds you have and analyse the investment returns and the fees you pay (admin fees, investment fees, life insurance premiums etc.)
You may find that you will both save AND make money by rolling over into one solidly performing super fund.
Simply getting smarter with your funds can help you grow what you have quicker.
7. Downsize and divert money into super
One strategy that might work for you if the numbers aren’t adding up quite how you’d like is to downsize and start channelling money into your super fund.
This may be a good option if you are already over 65 or if you have a home that is currently under-utilised: perhaps your children have moved out or other circumstances changed?
Downsizing to a smaller home may have tax benefits and/or release lump sums that can be used for contributions into your super.
Grow your super - starting today!
If you’ve read this far, it’s likely that you’re concerned about your super fund going the distance to look after your loved ones in later life.
After all, you might live into your 90s or beyond 100!
Don’t panic. It’s a positive sign that you want to do something about it.
Super gets preferential tax treatment and it just takes a little planning, juggling of priorities and action to start channelling money into your fund and growing it.
The immediate peace of mind you will experience from the knowledge that you are securing your future will be just as valuable as the financial benefits you’ll receive later in life.
Assess the current status of your fund(s); understand if there is a shortfall between where you are now and where you should be for the lifestyle you are planning; and then start doing what needs to be done to grow what you have, considering the methods outlined above.
If you need assistance with growing your super fund, feel free to contact us on 08 6336 6200 or info@ascentwa.com.au for professional advice.
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One of the most powerful decisions you can make with your superannuation is whether to run your own self-managed super fund (SMSF) and whether to invest in property through it. Most people know it's possible to use super to buy property. Far fewer know how to do it well. The following seven tips are designed to help you make the right decisions. 1. You Can Borrow Money to Purchase Property in Superannuation. Don't have enough in your SMSF to buy an investment property outright? Since 2008, superannuation held in a self-managed super fund can be used to borrow money for property purchase. This is done through a 'limited recourse loan' using a Bare Trust as the Custodian entity. You can't borrow the total value of the property—typically it's up to 80% for residential properties and 60% for commercial properties, with the required deposit held in the SMSF as security. The SMSF then makes the loan repayments, with rental income received by the fund and property expenses paid by the fund. Importantly, if there is a default on the loan, your other assets in the SMSF are generally protected from standard debt recovery and bankruptcy proceedings. The lender only has recourse to the property itself. Upon completion of the loan repayment, ownership of the property transfers legally to the SMSF. 2. Follow These 8 Steps to Set Up Your SMSF Setting up an SMSF properly can be a complex process. It’s best to set up an SMSF with the assistance of a qualified superannuation advisor, like us! We can assist with both the initial setup and the ongoing management of your fund. There are eight core steps to SMSF set up: Select the appropriate structure and name Sign the trust deed that covers how your SMSF is set up and run (it can have up to four members) Establish a trust for the SMSF by investing assets into the fund Register your SMSF with the ATO Set up a separate bank account for your fund Submit your tax file number (and those of any other trustees) Obtain an electronic service address to receive employer contributions into your fund (if applicable) Roll over funds from your existing superannuation account into your SMSF 3. Keep a Liquidity Buffer If you're buying property through superannuation, make sure you plan to keep a liquidity buffer of cash and/or shares in your fund. Lenders will check for this before lending to you—it should be at least 10% of the value you intend to borrow. But beyond satisfying the bank, it's simply good risk management. Property is an illiquid asset. Having accessible funds in the SMSF means you're not caught short if repairs are needed, the property sits vacant, or an unexpected expense arises. Because superannuation is central to most Australians' retirement security, the government has carefully regulated what can and can't be done with it. They don't want people gambling their retirement away on poor investments or incorrectly using their superannuation fund. 4. Use the Rental Income to Repay Your Loan You cannot live in the property you purchase through your SMSF until after retirement. Most people purchase an investment property and use the rental income generated to repay the loan—which makes excellent financial sense. The key is selecting a property that rents easily and delivers a strong rental return. Your purchasing criteria may look a little different to buying a home you'd live in yourself. For example, proximity to public transport, local amenities, and average rental rates in the area matter more than personal preference. 5. Get It Right and Enjoy Significant Tax Efficiencies One of the most compelling reasons to invest in property through superannuation is the tax efficiency on offer. These benefits can significantly improve the long-term return of a property investment compared to holding it in your own name. Key tax benefits include: No capital gains tax or tax no yearly investment earnings if under super caps. Salary sacrifice advantages if you're sacrificing salary payments into super, loan repayments are effectively tax deductible. Capped tax on investment income—the maximum rate of tax on income after expenses is 15%. Any capital gains on investments held for 12 months or more, is taxed at 10%. Standard investors outside super can pay up to 47%. 6. Follow the Same Due Diligence Rules as Any Property Purchase Buying through superannuation doesn't mean relaxing your standards. If anything, the rules governing SMSFs mean you need to be more rigorous, not less. Property is likely one of the most significant financial decisions of your life. Research, not emotion, should drive your choices. The same rules apply whether you're buying in or out of super: Visit and compare multiple properties Know the values of similar properties in the same area Get all property checks performed by the right professionals Shop around for the right loan structure and lender Don't abandon good investor habits just because the structure is different. 7. Always Get Quality Professional Advice Nothing comes without risk—but the right advice significantly mitigates it. The key is understanding what you're getting yourself into: making informed decisions based on accurate data; keeping a diversified superannuation portfolio that doesn't place all your eggs in one basket; and not underestimating how complex buying property in superannuation can be. Sound Simple? It’s all in the details. If the above tips have made it sound straightforward, know that the detail is where the complexity lives. Getting professional advice from the start helps ensure you make the best possible decisions for your future. When selected according to rigorous property-purchasing criteria, property can be an excellent way to grow your superannuation and increase your chances of building a retirement fund that supports the lifestyle you want. Ready to Explore Property in Your SMSF? Whether you'd like to discuss whether an SMSF is right for you or need help setting one up, reach out to Ascent Accountants . If you want assistance managing the property within your fund, contact the Ascent Property Co team .
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