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The Australian Superannuation Fund Association (ASFA) predicts that by the year 2020 there will be $1699 billion sitting in super funds.

Did you know…

·          The Australian Superannuation Fund Association (ASFA) predicts that by the year 2020 there will be $1699 billion sitting in super funds.

·          According to ASFA a 25-year-old today earning $30,000 will have around $142,000 in super when they retire at the age of 60.

·          Australia is the fourth largest nation of savers thanks to compulsory superannuation.

·          Small business owners have a smaller super balance per person than employees. According to the AMP.NATSEM small business report small business owners only have $39,800 stashed away whereas employees have $49,900.



The way you invest your money you money will have a significant impact on your retirement.   In addition to providing financial security in retirement, superannuation generally offers significant tax benefits.

Together with the growth of your superannuation fund, these tax benefits should assist you in accumulating funds faster, providing a higher level of income at retirement.

Some of the tax advantages that are available through superannuation funds include:

  • Superannuation earnings are taxed at 15%, high income earners may incur superannuation surcharge.
  • Employees can reduce their taxable income through salary sacrifice. By contributing pre-tax salary into superannuation, your effective tax rate on the contributed funds is 15% (before superannuation surcharge*, if applicable) rather than your marginal personal tax rate.
  • Realized Capital Gains are taxed at a reduced rate of 15% (before superannuation surcharge*, if applicable) and discounted by one third if held for more than one year.
  • Superannuation members and individuals are able to contribute on behalf of a non-working spouse up to age 65; if aged 65-69, the spouse must be gainfully employed before a contribution can be made. The contributing spouse may be eligible for an income tax rebate of up to 18%.
  • Self-employed individuals can claim a tax deduction for contributions made to superannuation up to certain age based limits.
  • Individuals can also make deductible contributions to their fund. Here the personal contribution is taxed upon entry to your super fund and the contribution amount is tax deductible within age-based limits (at your marginal tax rate).
  • If you are eligible and make a personal contribution to super, the Government will match your contribution with a Superannuation co-contribution up to certain limits.

Not only is contributing tax-effective, drawing an income from your super can be tax effective too! Many pensions drawn from superannuation funds are entitled to a tax rebate of up to 15% per annum.

For most Australians, superannuation has become an important issue in our working lives.  Over the past 10 years, employers have been required to contribute to superannuation on your behalf and as of July 2002, this amounts to 9% of your annual salary.

Although this may seem like a lot, many financial planners believe it will still not be enough to allow you to live comfortably in retirement.  Boosting your super savings is probably one of the most important steps you will take in planning your retirement.  There are a range of strategies that you can assist you in maximizing and growing your superannuation.  Some things you can do are:

1.       Making super contributions on behalf of your spouse: A useful superannuation opportunity is the ability to make super contributions on behalf of your spouse. There is no limit to the amount you can contribute.   There are some special incentives for those with a spouse on a low income. Depending on your spouse’s income, you may be eligible to receive a tax rebate of up to $540 on the first $3,000 worth of contributions you make. Spouse contributions also provide other tax benefits for couples, such as:

    • The ability to distribute super assets more evenly to take advantage of splitting income in retirement
    • Spouse contributions are undeducted contributions and therefore are tax-free upon withdrawal.


  1. Investing:  Super is an excellent way to invest money for your retirement. Your retirement savings grow because money is paid in regularly, which your fund invests at low rates of tax. Tax concessions and other government benefits currently make super one of the best ways to invest for the long term.

    Super funds may also offer life insurance cover, and total and permanent disability insurance. Some offer other types of insurance if you become disabled or sick for an extended period.


  1. Self-employed:  In most cases, you join a fund as soon as you're employed, because by law your employer must pay contributions into a fund on your behalf.If you are self-employed, you can decide if you want to join and contribute to a fund. If you are not currently employed, or never have been employed, you can still join and contribute to a fund up to age 65.  Thanks to the new rules, it now benefits you to invest as much as you can into your fund.  Especially, if you are getting close to retirement because the rules, which start officially on July 1, 2007, scrap the unpopular reasonable benefits limit laws that put a cap on how much you can save in super before your benefits stop being taxed "concession ally".  Under the new rules, your super fund can grow as big as you want it to.  You won't have to worry about "concessional" tax treatment, because all super benefits will be tax-free, as long as you are over 60 and wait until after July next year.

If you are going to throw large sums of money at your super fund, now is the time to do it. Do not hesitate, because although the Government says it is now OK for your super fund to grow to whatever size, it will not allow you to make personal, undeducted contributions of more than $150,000 a year from July 1 next year. There is always a catch. The good thing is that, as a transitional arrangement, you are allowed to contribute up to $1 million to super before the new rules come in next July. That gives anyone thinking about selling assets to prop up their super the chance to do it. However, it is an once-in-a-lifetime offer.

As a wealth creation strategy, borrowing a lot of money just before you retire would normally be looked down on. However, that changed when the Government said it would allow anyone to contribute up to $1 million to their super fund by July 1, 2007, before the new $150,000 annual cap comes into force.  Many experts agree that borrowing money - even as much as $1 million - to make super contributions is a worthwhile strategy, for a short time for a small number of individuals.

Typically, you would be someone planning to sell assets to contribute to super anyway, but unable to get your hands on the cash before July 1. Foe example, you may need to sell property, which could take some time.

By borrowing $1 million, you could make a big lump sum super contribution and repay the loan as soon as you sold down your assets and before interest costs mounted up.

Do not panic if you plan to make a big, one-off contribution to super but do not think you can manage it before the deadline. There’s still one loophole that you should be able to slip through if you are under 65.While the Government is limiting personal contributions to $150,000 a year after next July 1, it will allow those under 65 to make three years' contributions at once. In other words, you can put $450,000 into super in one go, but will not be able to contribute for the next two years after that. It is a handy loophole, particularly if you are selling property and want to pump the proceeds into your super fund. In addition, remember, if you own property or other assets jointly with a spouse, you can each contribute $450,000 from their sale into your respective funds. So, that's $900,000 in contributions you can get away with in one year, even when the official limit is $150,000.If you are over 65, you won't be able to bring forward the two years' contributions. In fact, to contribute at all you will have to satisfy the "work test" by being gainfully employed for at least 40 hours over a consecutive 30-day period.

4.       Tax cuts help savings grow:  Along with having the ability to choose your own fund, the July 1 superannuation changes also brought in a new regime of superannuation tax cuts that Andrew Heaven says gives us even more incentive to tuck our cash in super."The Super Surcharge finished on June 30. That means the tax high net worth individuals pay on super has been reduced.  "That means that before June 30, anyone earning over $121,070 that contributed to super was taxed at 27%. As of July 1, any contribution is now taxed at 15%. That's a huge difference."  It pays to contribute to superannuation under a company rather than business structure, but there's still great savings to be made.  "If you're under 35, in 2005/2006 financial year you can deduct up to $14,603 as a business expense. However it you're self-employed, you can claim the first $5000 in super contributions and then 75% of contributions thereafter."

  1. The new rules

·         All super benefits will be tax-free from July 1, 2007, for people over the age of 60.

·         Reasonable benefit limit rules, which impose tax penalties if you save too much in super, will be scrapped from July 1.

·         Undeducted, or personal, after-tax super contributions will be capped at $150,000 a year from July 1. As a transitional measure, $1 million can be contributed before July next year.

·         Deductible contributions will be limited to $50,000 from July 1.

·         Better incentives for the self-employed.

·         If you have not turned 60, remember that the new super rules, including the ability to take benefits tax-free, will not apply to you until you do.

6.      Predications for the future:

·                     The Australian Superannuation Fund Association (ASFA) predicts that by the year 2020 there will be $1699 billion sitting in super funds.

·                     According to ASFA a 25-year-old today earning $30,000 will have around $142,000 in super when they retire at the age of 60.

·                     Australia is the fourth largest nation of savers thanks to compulsory superannuation.

·                     Small business owners have a smaller super balance per person than employees. According to the AMP.NATSEM small business report small business owners only have $39,800 stashed away whereas employees have $49,900.

Few, can match that.



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