Why top up your super?
- Your super might need to last 20-40 years after you retire (depending on how long you live for).
- You'll need more money than you think because, over time, the cost of things increases.
- You might want money for extra things after you retire (like travel).
- The tax benefits on super make it a good way to invest your money.
- The government might match any extra money you put in to boost your super.
- When you retire, you won't get a regular income from working anymore. You'll have to live off money you earn from your super investments and any money you may be able to get from the government's age pension and other benefits.
What to think about?
Any money you put into super must stay there until you retire. You need to weigh up the potential benefits of topping up your super now against other things you might do with your money. You might want to pay off your credit card, save for a deposit on a house, or pay off a home loan. Depending on your circumstances, it might make better financial sense for you to do these things rather than put extra money into super.
Topping up your super
Building up super from your own money is generally an excellent investment, thanks to tax concessions and other government benefits. You can make extra contributions to your super fund from money that you have already been taxed on. These are called after-tax contributions. If you put your own after-tax money into super, you could receive a government co-contribution depending on how much you earn. If your total income is $34,488 or less, the maximum co-contribution is $500, based on $0.50 from the government for every $1 you contribute. Co-contributions reduce as your income increases, phasing out completely for total incomes of $49,488 or more. (These income levels are for the 2014-15 tax year.) The rules for government co-contributions can change, so check the Australian Tax Office (ATO) for the latest information.
You can also increase your super and pay less tax by using salary sacrifice - this lets you 'sacrifice' some of your pre-tax income into various benefits, including super. It may sound complicated, but for some people this is a very good way to boost their super savings. Check whether salary sacrifice is available in your workplace, and see whether it's a good option for you. Make sure salary sacrificing won't reduce what your employer would otherwise contribute.