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Relax. This isn’t one of those articles.

You know the type – the ones urging you to give up ‘just one takeaway coffee every day’ and invest that $4.50 instead to reap the rewards of compounding returns later. The fact is, if you’re anything like us, you need to get that coffee to a) function, so you can keep your job, and, b) catch your breath, so you can keep your sanity.

No, don’t give it up. Think of it as an investment in your future.

But if you want to enjoy your coffee and enjoy a comfortable retirement thanks to the power of compounding returns, read on. Andrew Donachie, Senior Manager of Advice Delivery at 91����, says that for most people, super will grow into their most valuable asset outside the family home.

“When you think about your super in that light, it makes perfect sense that you should be optimising it – that your super should be as fit for purpose as it possibly can be,” Mr Donachie says.

“Yet so many of us neglect to take some simple steps and take advantage of allowances purposely built into the system to achieve just that.”

If you’re one of them, there’s no time like today to fix it.

There are many ways to supercharge your super – some suitable, and indeed sensible, for anyone of any means, others for people at certain stages of life.

Here are some of our top tips.

Consolidate your super

It’s a statement of the obvious, right? Indeed, barely a breakfast TV interview on super passes by without ‘consolidation’ getting a mention. Combining your super in one account not only makes it easier to track and control – it also ensures you won’t be paying multiple sets of fees. Yet data from the Australian Taxation Office shows the message still falls on deaf ears. At the end of last financial year, some three million Australians – around one in every five people with a super account – had two or more accounts.

Thankfully, the trend is positive. Just three years earlier, around one in every three people had two or more accounts. If you have a myGov account, you can consolidate your super online through the ATO (at the same time, check you don’t have any lost super – a situation that can happen if, for example, you move house and a fund you were previously with hasn’t been able to reach you).

Alternatively, contact your preferred super fund and they’ll help you through the process. Before you do, however …

Make sure you’ve chosen a top fund

91����’s Mr Donachie says strong long-term returns and competitive fees are crucial to maximising your super.

“It’s impossible to overstate the importance of these factors,” he says. “If you’re with a top-performing, highly competitive fund, the benefits might seem relatively small from one year to the next, but over time it can have a profoundly positive impact on your balance.”

In a marketplace with more than 20 profit-to-member industry funds (and scores more retail funds), the task of comparing providers can sound daunting. It isn’t. The ATO’s comparison tool allows you to quickly compare long-term returns and fees across MySuper products – the low-cost default accounts used by most Australians.

You can tailor your search according to your age and balance. There are also many non-government “comparison websites”, although the Government’s website cautions against using just one of these sites to pick a fund as the options presented might be influenced by commercial arrangements.

Consider an option with a lifecycle approach

Most funds offer various investment options as an alternative to their MySuper option, giving you more choice in how your super is invested. These options allow you to, for example, narrow your investments to certain asset classes, to assets that meet more rigorous environmental hurdles, or to ‘growth assets’, which generally deliver higher long-term returns but may fluctuate more in value in the shorter term. When it comes to maximising your super for retirement, your choice of investment option can be one of the most significant factors. It may be worth considering an account with a lifecycle approach, particularly if you’re more likely to favour a ‘hands off’ approach.

With a lifecycle strategy, the amount of risk in your investments is gradually and automatically scaled back as you approach retirement age, when you have less time remaining in the workforce for your super to recover if markets hit a choppy patch. Some major funds build this approach into their MySuper default option.

“Because lifecycle can help moderate the effect of market volatility for members nearing retirement age, we find it provides them with great peace of mind,” Mr Donachie says.

Check you’re getting what you’re owed

Employers are required to pay super at a rate of at least 10.5 per cent (rising to 11 per cent in July) of ordinary time earnings, with very few exceptions. All good and well, but unpaid super – be it by error, on purpose or because a business has collapsed before paying up – continues to be a serious problem. The ATO estimates $3.4 billion of super went unpaid in the 2020 financial year. That’s an average of more than $250 for every person employed in Australia at the start of that year. If you assume the vast majority of people are getting their correct entitlements, that average jumps significantly for those who aren’t.

The bottom line? Make sure you’re not among them.

Login to your super account through your fund’s website or app to see your payments, then reconcile them with your payslips to ensure you’re getting the correct sum
If you’re not, query it with your employer, or you can report it to the ATO online.

Some employers – bigger companies and those in the public sector in particular – pay super every payday, but note that the law allows for it to be paid as infrequently as every quarter. The Government has payday super will become compulsory for all employers, but not until July 2026, so make sure your super entitlements aren’t falling through the cracks in the meantime.

Top it up!

Okay, so we don’t suggest forgoing that coffee, but if you are in a position to put extra into your super, it can go a very long way.

Firstly, there is that bit of magic, the power of compounding returns. 91����’s analysis indicates every dollar invested early in your working life can be worth three dollars at retirement. Then there are the tax benefits (a timely thing to consider with June 30 approaching). When your employer pays compulsory super into your account, that money isn’t subject to income tax like your salary. It is taxed, but only at 15 per cent – significantly less than the marginal tax rates most workers pay. That’s why these super contributions are known as ‘concessional contributions’.

The beauty is that up to a limit, most people can chip in over and above the amount their employer is required to pay, and it’s still taxed at this concessional rate. You can do this through salary sacrifice – an agreement with your employer to regularly put more money into your super (beyond your compulsory entitlements) – from your salary before income tax is applied.

You can also make an extra contribution from your take-home pay, and claim it as a tax deduction in your tax return. Just note, you’ll need to meet certain conditions and advise your super fund of your intention to claim a deduction – by completing a ‘Notice of Intent’ form – before submitting your return.

Including super from your employer, the annual cap for concessional contributions is currently $27,500, though you may be able to add more, depending on your super balance. Investment earnings in your super account are also generally taxed at only 15 per cent, rather than your marginal tax rate. Because of this, many people like to make further contributions to their super, other than concessional contributions.

The Government does allow you to contribute money to your super on an after-tax basis (that is, money you’ve already paid tax on, like your take-home pay). These are known as non-concessional contributions, and you can’t claim them as tax deductions. The non-concessional cap is $110,000 in any year, or $330,000 at any point in a three-year period under what’s called the ‘bring forward rule’.

Get a top up from the other half …

If you’re a lower income earner or you’ve taken time out of the workforce, your spouse can chip in to your super and potentially receive a tax offset.

“One of the key factors leading to lower average super balances at retirement for women is they’re statistically more likely than men to take time away from work for caring responsibilities,” Mr Donachie says.

“Spouse contributions can help address this, with the added incentive of a tax benefit.”

If your income is $37,000 or less, your spouse can claim an 18 per cent tax offset on any post-tax contributions to your super up to $3,000 per financial year – a maximum offset of $540. The offset reduces for every dollar of income over $37,000, phasing out to zero at $40,000.

You can also receive contributions from your spouse through contribution splitting – that is, your spouse can direct up to 85 per cent of his or her concessional contributions from the previous financial year into your super. Age limits and other conditions apply to spouse contributions, so contact your super fund for more detail.

… or from the Government

The super system is there to set you up for your best possible retirement and take pressure off the taxpayer by reducing demand for the Age Pension. To that end, there are other initiatives built into the system to support lower income earners.
If you’re among this group, for every dollar you put into your super as a personal contribution from your take-home pay, the Government will chip in up to 50c – to a maximum of $500 per year.

As a rule of thumb, to get the full $500 Government co-contribution, your annual income will need to be $42,016 or less, and you’ll need to contribute at least $1,000. The less you contribute or the higher your wage, the lower the co-contribution will be, cutting out entirely above incomes of $57,016. Your personal contribution needs to come from after-tax money, meaning you won’t be able to claim it as a tax deduction. The ATO will work out if you’re eligible and pay it directly into your super account after you complete your tax return.

Get help

There are many other ways to get the most out of your super, from taking a ‘transition to retirement’ income stream, which can offer tax benefits, to making a downsizer contribution – investing some proceeds from the sale of your home – and a whole host of other strategies.

As sure as night follows day, there are limits and eligibility rules you need to take into account for all the super-boosting strategies discussed above. You also need to consider the best course of action for your circumstances. If you have a mortgage, for example, it might make more sense to pay it down rather than top up your super. That’s where guidance and advice can help.

Super funds often provide general and simple advice for members at no extra cost, and comprehensive advice for a fee, for those with more complex needs. Your fund may also host seminars and webinars with lots of tips and tricks, and offer digital calculators and advice tools online.

“All these services can be incredibly powerful in helping you understand your options and really setting you up for the long term,” says 91����’s Mr Donachie.

Take a super sip

One last tip. Put that takeaway coffee to work.

While you’re sipping it, take a few minutes to go back through this article and start getting your super fighting fit. That way you can enjoy your cuppa now, and reap the rewards of compounding returns later. Think of it as an investment in your future.
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Andrew Donachie, Senior Manager of Advice Delivery at 91����, says its impossible to overstate the importance of strong long-term returns and competitive fees.

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^{This article originally appeared in Red Tape Magazine. Contribution caps and co-contribution thresholds are current for the 2022-23 financial year.}

^{This is general information only. Before taking any action, please consider your own circumstances and consider getting advice to make sure it is appropriate for you. Please also look at the relevant Product Disclosure Statement.}

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