Boost your Super this Spring

By Jacqueline Hodges

Spring is the time for new beginnings and new growth. So, now is also a good time to review and boost your super. Women on average retire with $115,000 less in superannuation than men, and one in three women retire with no super at all. Is it simply women are not as financially savvy as men?

Well, not at all. The underlying reason for our lower retirement balance is much more human than that. Very simply, women are more likely to have a broken career pattern. We are the child bearers and nurturers, or the carers of other family members. While, not the only reason, it is this broken career pattern that has the major impact on our employment earnings and superannuation balance. Our wages are lower, we leave our paid employment to start, grow and care for our families. We change our career ambitions as we embark on the part-time juggle or we leave the security of employment for freelancing in the gig economy as we choose to remain at home with our children. But we can choose to improve our superannuation balances. In this article, you’ll discover eight strategies to reboot your super this Spring. Earlier, this year our superannuation balances were hit hard. Lockdown brought lower valuations and a drop in superannuation balances of up to 12.5% according to Super Ratings. Yet, recovery continued and by the September quarter, superannuation funds posted their fifth consecutive month of gains. It is true that superannuation is a long term investment and Australian Super suggests we should expect a loss year at least in every 20 years. But superannuation is a large industry sector with $2.9 trillion under investment.

$ Billions 800 700 600 500 400 300 200 100 0 Australian Superannuation Sector

Industry Funds SMSFs Public Sector Fund Retail Funds Other funds

Source: APRA Statistics – June quarter 2020 and APRA annual statistics for no. of accounts

While accessing your super early is not going to help grow your retirement balance, we have included it here as a reminder that you now have until 31 December 2020 to access $10,000 under the temporary early access to superannuation. Government, in response to the COVID-19 pandemic, allowed the temporary Early Access to Superannuation this year. This measure allowed those eligible to access up to $20,000 of their superannuation. The early release was limited to $10,000 up to 30 June 2020. If eligible, you may access a further $10,000 up to 31 December 2020. If you took advantage of the temporary early access, you should make sure that you did not exceed the $10,000 maximum for each financial year and that you met the eligibility criteria. The ATO does intend to audit the drawdowns for illegal early access. The following paragraphs summaries the 8 strategies to reboot your super this Spring. Stapling of accounts

Freelance contractors, those in the gig economy and job changers frequently have a new superannuation fund account created with each new employment contract. Holding more than one superannuation account may negatively impact your retirement balance. One factor impacting limiting growth, is that fees are charged on each and every superannuation account you hold. Inefficiencies may also impact your investment options. With available funds spread across several funds, you may miss investment opportunities. Legislation has now passed to staple superannuation accounts to an individual. So, as you move between employers, your superannuation fund will travel with you. This prevents newly created and unintended multiple superannuation accounts when you change employers. Until the procedures and software are refined, you should have your superannuation fund details ready, if you are commencing with a new employer. You can find your fund details and balance on your mygov account.

YourSuper, an interactive comparison tool that will rank MySuper funds will be available from 01 July 2021. You will be able to compare your fund’s fees and performance with other MySuper funds. Superannuation funds will also be required to meet an annual objective performance test. Funds that fail two consecutive annual underperformance tests will not be permitted to accept new members until their performance improves. SMSF Memberships

Often referred to as a Family Fund or a DIY Super Fund, Self-Managed Superannuation Funds are funds that are managed and controlled by individuals with the help of an accountant and a financial adviser.

Previously, these funds were limited to four members, which presents problems for families with more than two children. SMSFs can now offer membership to up to six members. By combining more of the family funds under the one roof, you may be able to pool funds to invest together or invest separately. The choice is yours. Fees may also be lower if using only one SMSF. Contribute for longer

Employer and member contributions are received into your superannuation fund during the accumulation phase. Upon retirement you generally convert that balance into pension phase. However, and while a little more complex, you can hold both an accumulation account and a pension account in super. This flexibility allows you to drawdown your pension from one account but also to contribute to an accumulation fund for growth. If over 66, you will need to consider the work test.

As you pass retirement age, a work test comes into play stipulating the conditions in which a fund may accept member contributions. The work test: you must work at least 40 hours during a consecutive 30 day period each income year in order for your fund to accept a personal super contribution for which you can claim a deduction. While a work test applies for those over 66 years of age, you can continue to make contributions to your superannuation up to the age of 66 without needing to meet the work test.

Non-concessional contributions are made into your super fund from after-tax income. These contributions are not taxed in your super fund. A non-concessional contributions cap limits the annual amount that can be contributed to $100,000. Special bring forward rules apply, so that an amount of $300,000 can be contributed across each rolling three-year period. Worth considering if you have a larger investment such as real property in mind. Spouse contributions age limit increase

The age limit for making spouse contributions has increased from 69 to 74. This means that people aged under 74 can receive contributions made by another person on their behalf. Seek financial Advice

You should always seek professional financial advice before changing or starting a superannuation fund. A financial adviser will also be able to help you with the fund’s investment strategy and boost your super. Finally, ASIC has a useful tool to show how your superannuation balance will grow simply by increasing your contributions. We’ve included the link for you: https://moneysmart.gov.au/how-superworks/superannuation-calculator.

Jacqueline Hodges is a Chartered Accountant and Registered Tax Agent. She is a Financial Adviser and an authorised representative of Wealth Today. She has a wealth of experience having worked in the financial services sector for most of her career. Jacqueline is a firm believer in continuing education and holds a Bachelor of Commerce (UQ), a Master of Taxation (UM), and a Financial Planning Certificate. She established her own accounting firm servicing individuals and small businesses in 2005 and complemented the business in 2015 with the opening of the financial advice division.

Disclaimer: The information contained in this article is general in nature and may not be relevant to your personal circumstance and needs. Taxation, legal and other matters referred to in this article are of a general nature only and are based on laws existing at the time and should not be relied upon in place of appropriate professional advice. We recommend that you assess whether the information is appropriate to your needs and if appropriate speak with a financial adviser to discuss your needs, financial situation and investment objectives. Jacqueline Hodges (AR 1238790) and HQ Wealth Pty Ltd as trustee for HQ Wealth (CAR 1238791) are authorised representatives of Wealth Today Pty Ltd ABN 62 133 393 623 AFSL 430289.