16 February 2024
It’s often said that a change is as good as a holiday, and a period of extended leave will certainly offer a change. If you're planning a career break - or are already on one, then you may also be facing a change to your income. Whether you plan to travel, are taking a break for family reasons, or just want a break from the 9 - 5, consider your super when you're thinking about your finances.
Making the decision to take time out from the workforce is never done lightly, but stepping out of your usual work environment, whether that’s to travel, do something completely unrelated to your ‘normal’ career or to temporarily stop working, can be very refreshing.
In most cases this could impact the amount of money you earn and therefore, your super balance. Consider putting some plans in place to ensure your super doesn’t stop working for you in the background. After all, retirement is the ultimate career break.
Super tips if you’re planning a career break
Locate and consider combining all of your super
Do you know how many super accounts you have?
Before taking time off work, or even while you’re on your break, it’s a good idea to consider putting all your super in one place. It could help you save on fees, avoid duplicate insurance policies, and make it easier to manage your super.
Doing a simple super search could help track down any money that belongs to you. You can find any lost super you may have using the ATO online services through myGov. Alternatively, if you’re an AustralianSuper member – log into your account via the Member portal and give the Fund consent to use your Tax File Number (TFN) – we can help track down your lost super.
Before combining your super, ask your other super provider about any fees or charges that may apply, and effect a transfer may have on benefits in your other fund, such as insurance cover. We recommend you consider seeking financial advice.
In some circumstances, insurance through your super will stop if no money (any contribution or rollover) is added to your account for 16 months. See the Insurance in your super guide for more information about when cover stops and what you can do to keep your insurance.
LEARN MORE: INSURANCE THROUGH AUSTRALIANSUPER
Try to make up for lost time
Whether your career break is planned or otherwise, consider the following points to give your super a boost.
Add to your super by salary sacrificing
For many people, taking a career break can mean your income is reduced. And often, any super contributions you receive are also reduced as a result. To help compensate for this dip in income, consider making extra contributions towards your super – by salary sacrificing – before you take time off. Or, if you’re already on a career break, consider salary sacrificing when you return to work to make up for it.
When you ‘sacrifice’ some of your salary, you make an agreement with your employer to pay this amount straight into your super account instead of your bank account. It will mean a little less take-home pay, but it could have a significant impact on your super balance when you retire.
Salary sacrificing could also reduce your taxable income, which means you might even pay less at tax time. Before adding to your super, consider your financial circumstances, contribution caps that may apply, and tax issues.
DOWNLOAD PDF: ADD TO YOUR SUPER AND RETIRE WITH MORE
Salary sacrificing isn’t for everyone and may affect some Government benefits and employee benefits. Consider getting financial advice before deciding if a salary sacrifice arrangement is right for you. Those on a lower or middle income may benefit from after tax contributions instead, or a mix of both. As super is generally taxed at 15% (depending on how much you earn), making before-tax contributions to your super can provide a tax-effective way to boost your super savings.
Make the most of government assistance
If you’re already on a career break, you’re probably earning less than what you normally would. Because of this, you may be eligible for a super co-contribution from the Australian Government.
If your yearly income is less than $43,445 (before tax, for the financial year of 2023-2024), and you meet the eligibility criteria, the Government will match 50 cents for every $1 you add to your super from your after-tax income1, up to a maximum of $500. If you earn more than $43,445, the matching rate gradually reduces until it phases out completely at $58,445.This could mean up to a $500 contribution from the Government. The amount depends on your income. This co-contribution gets paid directly into your super account after you’ve lodged your tax return for that year.
Consider spouse contributions
If you have a partner who will continue to work while you take a career break, there are a few options that might allow you to keep contributing to your retirement savings.
While you can’t combine your superannuation with your partner’s, you may be able to grow your super balance with after-tax contributions from your spouse1. It’s not all for you – this might also benefit them too. Depending on your income, your spouse could be eligible for a tax offset.
FIND OUT MORE: ADDING TO YOUR PARTNER’S SUPER
Split a super contribution
There’s also the possibility of using contribution splitting – a method of adding to your superannuation that allows your partner to transfer some of their before-tax super into your account. The super they transfer to you must be from a before-tax source. That means super added to their account by their employer, either as part of their super guarantee or via a salary sacrifice arrangement.
You’ll need to make sure you’re eligible to use either of these strategies, but they can both potentially offset some of the contributions you’ll be missing while you’re taking a break.
Think ahead – before and after your career break
Preparing for a career break can help give you peace of mind that you’re still working towards achieving your best possible retirement, even during your time away from work. Finding ways to contribute to your super before and during your break can keep your balance growing while you’re not receiving employer super contributions. When you’re looking into what a career break might mean for your financial future, make sure super is part of the equation.
And remember, if you’re starting a new job when you come back from your break – you should let your new employer know about your super account. If you don’t nominate a super account when you start a new job, your employer will contact the ATO to find your ‘stapled fund’ and will pay your super contributions to that account. If you don’t have an existing super account and don’t choose a fund, your employer will pay your super into their nominated default super fund.
TELL YOUR EMPLOYER ABOUT YOUR SUPER
References:
1. Before adding to your super, consider your financial circumstances, contribution caps that may apply, and tax issues. We recommend you consider seeking financial advice.
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This may include general financial advice which doesn’t take into account your personal objectives, financial situation or needs. Before making a decision consider if the information is right for you and read the relevant Product Disclosure Statement, available at australiansuper.com/PDS or by calling 1300 300 273. A Target Market Determination (TMD) is a document that outlines the target market a product has been designed for. Find the TMDs at australiansuper.com/TMD. AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.