Maximising your superannuation

The following topics can help you to maximise these concessions and allow you – and even your spouse – to receive more super:

• Superannuation versus non superannuation investments
• How superannuation grows
• Starting early
• Choosing a superannuation fund
• Finding lost superannuation
• Transferring your old superannuation into your AustralianSuper account
• Splitting superannuation with your spouse.

Super versus non superannuation investments

For many people, superannuation can be more tax effective than an equivalent non-super investment. This is because the Government provides tax concessions to encourage people to save for their retirement through superannuation.

For example, investment earnings in superannuation are generally taxed at much lower rate than earnings from a non-superannuation investment.

You can see in the chart below the impact of the superannuation tax concessions on $20,000 over a 20-year period, compared with a non-superannuation investment.

How superannuation grows

Your superannuation will increase over your working life through contributions and investment earnings.

Even better, the more you have in your account from contributions and accumulated investment earnings, the more it will grow.

That's because of compounding, which is where you earn interest on the interest that has already been added to your account.

Over time, the effects of compounding can make a big difference. In fact, Albert Einstein described compound interest as the most powerful force in the Universe!

An example of compounding in action

Maria, age 21 has $100 invested. Let's assume that in each of the next three years she receives a return of 5% after fees.

Year 1 – invests $100, receives a return of $5
Year 2 – balance $100 + $5 = $105, receives a return of $5.25
Year 3 – balance $105 + $5.25 = $110.25, receives a return of $5.51.

As you can see, each year Maria has a bigger balance to invest so she earns a larger return. As Maria keeps reinvesting, her account balance will grow by larger amounts over time.

Superannuation works in a similar way.

Your superannuation fund invests your contributions and investment earnings every year. As these increase, so does your account balance.

Starting early

Most of us will need to contribute extra amounts to superannuation, on top of what our employer pays, to ensure we have enough savings for a comfortable retirement.

Starting to make these extra contributions early is a good idea, as this gives your superannuation more time to grow. 

New laws introduced from 1 July 2007, limit the amount of before and after-tax contributions you can make to super each year. Contributions above the limits are taxed at 46.5%. 

Consider the chart below, which shows how much your account balance may increase with personal contributions on top of the Superannuation Guarantee contributions from your employer.

Just $1,000 per year could boost your retirement income by more than $138,700. Imagine what a differnce that will make to your retirment benefit. You can put a portion of your pay aside each week:

• Before-tax, through a salary sacrifice arrangement with your employer
• After-tax, out of your take-home pay.

Even if you can't commit to a regular contribution right now, you can make one-off contributions when you have the spare cash – even small amounts can make a difference over time.

Your first step is to prepare a budget. That way you can work out how much extra you can afford to put into your super.

Assumptions: opening balance $10,000 at age 30, annual salary $28,000, $1,000 yearly after-tax contribution, $1,500 annual Government Co-contribution, 9% employer contributions, 7.5% balanced option investment return, long-term inflation rate of 2.5%, $1 weekly administration fee, 0.63% investment management fee, retirement age of 65. Final balances expressed in today’s dollars, calculated over a 35 year investment period.*

* Source: AustralianSuper Super calculator.

Choosing a superannuation fund

There are different types of superannuation funds, but they can generally be divided into three groups:

• Funds that are run only to profit* members such as industry funds, in-house corporate funds, and government funds
• Funds that return profits to both members and shareholders, such as the master trusts and retail funds offered by banks, insurance companies and fund managers
• Personal or do-it-yourself funds, set up and run by individuals with large superannuation account balances.

When choosing a superannuation fund, it's important to ensure you choose a fund that meets your needs. Some of the areas you should consider are:

• Does the fund have a good track record?
• What fees and charges will apply?
• Does the fund pay commissions?
• Does the fund offer a good range of investment options?
• What kind of insurance cover does the fund offer?
• What is the level and cost of insurance cover?
• How will the fund help you with decisions about your super?

If you would like to see how AustralianSuper stacks up against other funds, just use our Fund Comparator

Finding lost super

It's easy to lose track of your old superannuation accounts. Before you can transfer these into AustralianSuper, you'll need to find the details of these lost superannuation accounts. There are a few different ways to do it:

• Your previous employer or workmates may remember the name of the old fund
• The Australian Tax Office can also help you find any superannuation you may have lost, misplaced or forgotten. You can use your Tax File Number to search their free online service at www.ato.gov.au/super or call 13 28 65
• AUSfund also publishes information about lost super. You can call AUSfund on 1300 361 798 or use your Tax File Number to search its free online search service at www.unclaimedsuper.com.au
• In general, having your old account number and Tax File Number will greatly assist you when searching for your lost super

If you have questions or need assistance, simply call AustralianSuper weekdays 8am - 8pm (EST).

Transfer your old super into your AustralianSuper account

Like many people, you may have your superannuation spread across a number of different accounts. If so, you're probably paying fees for each account.

Over your working life, this could cost you hundreds or even thousands of extra dollars – and that's just a waste of your money.

By transferring all of your superannuation into AustralianSuper, you may be able to reduce fees and build your retirement savings even faster. It's also much easier to keep track of your superannuation when it's all in one account.

To roll your other super into AustralianSuper, simply download the Transfer Your Super Form, fill in the details required for each additional superannuation account you have, and mail to AustralianSuper.

AustralianSuper will then arrange the transfer(s) on your behalf. More information about how to rollover funds to your AustralianSuper account can be found on our Transfer your super page. Make sure this suits your own personal circumstances before deciding to consolidate your super.

Superannuation splitting with your Spouse

A person can split their superannuation contributions between themselves and their spouse/defacto. Contribution splitting is available to both de facto and married couples (but not same-sex couples).

The maximum amount that can be split is:

• 85% or your taxed splittable contributions (eg employer and salary sacrifice contributions)

You cannot split untaxed contibutions including:

• personal (after-tax) contributions (or Government co-contributions)
• Amounts rolled over from other funds
• Lump sums from overseas superannuation funds  
• Payments made from a small business Capital Gains Tax (CGT) retirement exemption (i.e. where you have claimed an exemption from CGT when selling your small business to fund your retirement payments).

What are the benefits of splitting your superannuation contributions?

Splitting your superannuation contributions may give you the ability to take advantage of the following:

• A broader range of investment options so you can have more control over both of your superannuation accounts, e.g. eligibility for the ASX 200 Shares Investment Option
• Insurance cover for both you and your spouse, particularly where one account is lower than the other and has not had sufficient funds to afford ongoing insurance cover.

From 1 July 2007, contributions splitting may be a less attractive strategy for many people due to the abolition of Reasonable Tax Limits (RBLs) and abolition of tax on most super benefits.

Before making a decision to split your superannuation contributions with your spouse, you might want to consider seeing a financial planner to help you with your decision. As a member of AustralianSuper you have access to assistance from fee-for-service commission-free financial planners through Industry Fund Financial Planning.

How to split your superannuation contributions 

An application to split contributions can generally only be made at the end of a financial year for the previous year.

To split your contributions you must complete an application form, available by calling AustralianSuper. Once we have processed your application, we will pay the split amount to your spouse’s super fund. Spouse accounts can be opened with AustralianSuper through the AustralianSuper Personal Plan. You can only split your superannuation contributions if:

• Your receiving spouse is not retired or is under the age of 65
• Your contributions are not part of a defined benefit component
• Your contributions are not subject to a payment split or a payment flag under family law legislation; and
• A section 290-170 notice (intention to claim a deduction for contributions by the member) has been completed by those members wishing to claim a tax deduction before lodging a splitting request.

Where can the money be deposited?

The receiving spouse must deposit their share of the split contributions into a complying superannuation fund. The split contributions can be transferred into their AustralianSuper account if they have one, or we can set up a new one, or it can be paid to another superannuation fund.

Any split contributions will be subject to the receiving spouse’s preservation rules and Eligible Termination Payment tax-free threshold.

If they do not have a superannuation account or would like to open their own AustralianSuper account, they can join online or call AustralianSuper and request a Product Disclosure Statement.

By joining AustralianSuper or any complying superannuation fund, the receiving spouse can receive split contributions as well as deposit other superannuation contributions such as personal (after-tax) contributions and Superannuation Guarantee payments. Please note that all contributions will be preserved and tax and administration fees will apply.

Will there be a charge for splitting?

An administration charge of $70 will be charged per application. 

Do you have more questions?

If you would like to discuss Contribution Splitting, you can call AustralianSuper and they will be able to answer all of your queries.

You may also consider seeking advice from a financial planner.