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For most people in the arts, retirement seems like a long way off, right? People are living longer, working for longer, and still producing work well into old age. And for many lower-income earners struggling to earn a living, superannuation seems like a stash of money that could really be put to good use right now, rather than in the distant future.
But if you think superannuation is tricky to navigate now, try being old and poor. A robust superannuation account will make your life in old age comfortable, which is just what you deserve.
Step one: Get all your super together
Read: Ten tips to improve your superannuation
The first step is to put all your superannuation in one place. The average Australian has up to five super accounts. There is currently $16 billion of lost superannuation in Australia, and some of it might be yours. If you’ve changed jobs multiple times, you may have some lost superannuation sitting in an account somewhere, slowly withering away due to fees and charges. Combining your super accounts can save costs and make you substantially better off in retirement.
You can find any lost super by registering for a myGov account, where you can see details of all your super accounts, including any you may have lost or forgotten about.
Choose which fund is best for you – you can find more info on that here – and tell your employer. Make sure they know where to pay your superannuation. You can then roll all your super into the same account using myGov.
Step two: get some of Turnbull’s cashola
Read: Women retire with $150,000 less
Okay, so it’s not specifically his money – that is tied up in fancy North Shore properties. But the Federal Government will contribute a certain amount of super into your account when you make a personal contribution.
The government co-contribution is a payment made by the Federal Government to low and middle-income earners (hello, arts workers). The payment is designed to reward those who make an additional contribution to their super, on top of what their employer contributes, by matching 50% of voluntary contributions made. So if you contribute $1000, the Government will throw in $500.
If you make less than the highest income threshold (more on this below) and make a voluntary contribution, you may be eligible for a co-contribution of up to $500.
There are two co-contribution income thresholds:
- a lower threshold ($36,021 for 2016–17)
- a higher threshold ($51,021 for 2016–17).
If your total income is equal to or less than the lower threshold and you make personal contributions of $1,000 to your super account, you will receive the maximum co-contribution of $500.
If your total income is between the two thresholds, your maximum entitlement will reduce progressively as your income rises (by 33.3 cents for each dollar of income above the lower threshold.) You will not receive any co-contribution if your income is equal to or greater than the higher threshold.
If you make a voluntary contribution of less than $1,000, the amount of co-contribution applicable will also reduce. If your co-contribution is less than $20, you will be paid the minimum amount of $20.
The table below shows examples of what your co-contribution amount would be this financial year, depending on your income level and your personal contribution.
Contributions made in the 2016–17 income year
| Personal contribution |
||||
| Income | $1,000 | $800 | $500 | $200 |
| $36,021 or less | $500 | $400 | $250 | $100 |
| $39,021 | $400 | $400 | $250 | $100 |
| $42,021 | $300 | $300 | $250 | $100 |
| $45,021 | $200 | $200 | $200 | $100 |
| $48,021 | $100 | $100 | $100 | $100 |
| $51,021 or more | $0 | $0 | $0 | $0 |
If you are eligible for a co-contribution, it will be automatically calculated by the Australian Tax Office and deposited in your super fund each year after you lodge your tax return.
You can make a personal contribution by depositing money directly into your super fund. You can find the payment details on the super fund’s website. You may need your Member Number, which you can find on any documentation the fund has sent you. It’s important to note that your super fund will need your Tax File Number before it can accept your personal contributions.
If you want to make a contribution this financial year, your additional contributions must be received by your superannuation account before 30 June 2017, the last day of this financial year. Make sure to consider bank transfer times when sending the payment.
Step three: Watch it grow
The earlier in your career you begin to think about superannuation, the better off you will be in retirement. While improvements in health and general wellbeing means that people will be retiring later in the future, there will always come a time when you are too old to work, but still need to maintain your avocado toast habit.
Consider salary sacrificing even a small amount of your wage. Salary sacrifice is a misnomer: it’s not a sacrifice if you get the money back, plus more. Money paid into super is taxed at 15%, rather than the income tax rate of up to 45%. One estimate by AustralianSuper showed that a 25 year old putting an extra $50 a month into their super — just $600 a year — will have $175,000 extra by age 65, while a 35 year old doing the same will have an extra $79,000 and a 45 year old will have an extra $32,000.
This article provides general information only, and does not take into consideration your personal objectives, situation or needs. Before making a decision to combine your superannuation, you should consider any penalties such as exit fees, change to insurance cover or loss of benefits that may apply and, if necessary, consult a qualified financial adviser. Before making any financial decisions you should first determine whether the information is appropriate for you by reading the relevant Product Disclosure Statement and/or by consulting a qualified financial adviser.
