Superannuation strategies

Pouring more into super doesn’t have to break the bank

Did you know that giving up one coffee a day could mean around $94,000 extra in super?1 It goes to show making additional contributions into super doesn’t have to break the bank. As well as increasing the amount of savings in a retirement nest egg, making additional contributions can often deliver some worthwhile tax incentives.  There are a number of strategies to consider when making additional contributions into super. Which strategy to adopt could depend on an individual’s income, time to retirement and overall financial situation. Let’s take a look at the different ways additional contributions can be made into super.

Government co-contributions

If an individual has a total income of less than $61,920 p.a. (including assessable income and reportable fringe benefits), they may be eligible for some help from the Government through the co-contribution scheme.

The Government may contribute up to $1.00 for every $1.00 of after-tax contributions contributed to super, up to a maximum of $1,000 in a financial year. 

After-tax contributions

This involves contributing a certain amount to super from an after-tax income at regular intervals or as one-off payments.

The beauty of contributing the same amount at regular intervals means that ‘dollar cost averaging’ can be achieved, where more units are bought when the unit price is low and less units when the unit price is high. Essentially, the total cost is averaged, often providing more units than if an individual tried to time the market.

Salary sacrifice

A salary sacrifice arrangement involves contributing a certain amount of regular salary, bonuses or any allowances received from an employer, into super, before-tax. As well as potentially increasing the amount of an individual’s retirement savings, salary sacrificing may have some additional benefits such as potentially lowering taxable income.

Spouse contribution

A super account can be established on behalf of a spouse and/or contributions made on their behalf.

As well as building a retirement nest egg for a spouse there are a range of potential tax benefits.

What’s next?

To see the difference making additional contributions could make to an end retirement benefit go to the Superannuation Calculator in the Calculators & online resources section.

If you know your member number and PIN login to the secure member section of the site and check out the Voluntary super contributions calculator also.

To make a one-off after-tax contribution into your super account simply complete a Your after-tax voluntary contribution form and return it together with your cheque to Plum.

Alternatively, we offer BPAY^®.

To automate your salary sacrifice or after-tax contributions from your salary
and take advantage of dollar cost averaging, please contact your HR or Payroll representative.

For information on spouse contributions or If you require any assistance please call a Plum Member Services Consultant on
1300 55 7586.

Assumption: Based on a male aged 30, with a $20,000 super balance earning $50,000 p.a. If one cup of a coffee a day (costing $3.50) was given up and paid into super each year (approximately $1,280 p.a.) until retirement (at age 65). Invested in a balanced portfolio with an earning rate before management costs and tax of 8%. Fund fees consist of a management cost (% of accumulation) of 0.55%, $52 management fees p.a. and $78 insurance premiums p.a. Assuming contributions are paid monthly and Government co-contributions are included.