If you moved to Australia later in life, you might have started super late. You likely opened your first super account at an older age than those people who started their working lives here. That late start could mean that your super balance may be lower than you want to achieve the lifestyle you are looking for in retirement. So what can you do with your super if you were born overseas?
For example, if you were born in 1983 you would need $156,000* in your super now (in 2023) to reach the ASFA “comfortable” retirement standard at 67. Or, if you were born in 1973 you would need $281,000* in your super now. The “comfortable” retirement standard gives a single person an annual income in retirement of nearly $50,000.
You might think that you can never catch up and you might worry that you’ve left it too late. It might take some extra planning by you, but there are loads of different ways to get extra money into your super.
You’ve got options!
You may be surprised at how quickly contributions that you make can add up. And you might be surprised how easy it is.
Extra amounts into your super, whether large one-off payments or small regular payments, can help get you closer to the “comfortable” standard, or even to exceed it. Exceeding it could mean you could retire earlier or could live on a higher annual income in retirement.
The main options for putting contributions into your super are:
- Salary sacrifice (also known as ‘pre-tax contributions’)
- Regular after-tax contributions
- Ad hoc after-tax contributions
- Downsizer contributions
Depending on your situation, you are likely to find one or two of these types of contributions will suit you better than others. They all have different rules and eligibility which you need to understand. You can find more information about all of these types of contributions on the ATO website. Let’s have a quick look:
Salary sacrifice
Salary sacrifice is something you set up with your employer. They will set aside your chosen amount from your wage to pay into your super, before they calculate your tax. It means your taxable income goes down while you’re adding extra to your super.
There is an upper limit to the amount you can put in to your super this way each year. It’s called the Concessional Contribution Cap. The Concessional Contribution Cap covers a few other types of contributions too (such as the super from your employer that they’re legally obligated to pay you (10.5% in 2022/23 and 11% in 2023/24) and amounts that your employer pays ElectricSuper to cover admin costs). You need to consider the super your employer is paying when you work out what you want to pay as salary sacrifice to make sure you don’t breach the cap. The government reviews the cap’s limit each year and can change. You can find the current year’s limit and more information on the ATO website. You are also able to view how you are tracking against the cap at any time in the secure area of the website.
Depending on your super balance and whether you’ve put in the maximum amount you were allowed to in previous years, you might also be able to put even more in this year than the standard cap by using unused caps from previous years. This is known as “bring forward” or “carry forward” and the ATO has all the details on their website about this.
Regular after-tax and ad hoc contributions
You can set up these regular contributions with your employer too. Your employer will make these extra contributions from your salary after tax has been deducted.
You can also make lump sum contributions from your bank account. This can be a good option for you if your employer doesn’t offer payroll contributions of any kind to you. It’s also a good option if your wage or expenses fluctuate and you aren’t sure of how much you can spare each pay. This option of making ad hoc lump sum contributions gives you control of when and how much you add to your super. There is no minimum amount you can pay in.
Because these options are coming from after-tax money, these options won’t reduce your taxable income and they will reduce the amount you have in your back pocket. So, why would you make an after-tax contribution?
There are potential advantages:
- if you earn a lower income, you could be eligible for a government co-contribution if you make after-tax contributions. This is where for each dollar you contribute (from after tax money), the government will make a contribution towards your super too, up to $500. It’s not dollar for dollar, and there are minimums and maximums. However, it could mean you end up with free money from the government.
Read more about the government co-contribution on the ATO website.
These types of contributions also have a much more generous maximum limit than pre-tax (salary sacrifice) contributions. You could put in as much as 4 times more to your super without breaching the caps by putting money in as after-tax contributions.
Read more about after-tax contributions on the ATO website.
Downsizer contributions
If you are aged over 55 and you sell your family home, you may be able to put up to $300,000 of the proceeds from the sale into your super. If you are eligible, you can do this without breaching the Concessional and Non-concessional contributions we mentioned above.
Eligibility criteria applies, so you must research a bit further into whether this is right for you by looking at the criteria on the ATO website.
Other types of contributions
There are other options to get more money into your super, including spouse contributions and contribution splitting with your spouse. We have more information about these on our website and they could be worth investigating. Your spouse may be able to help boost your super!
What next?
- Check how you are tracking against the ASFA “Comfortable Retirement” Standard on our website. The results page will show you some options to get started on growing your super.
- If you want to speak to someone and get all the personalised facts about your super, you can make an appointment to meet with our Member Services Team. They can talk you through the different options. Make your appointment here.
* These figures are from the ASFA Super Balance Detective Calculator