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More than three million Australians pulled money from their super in 2020 to help them navigate the pandemic lockdowns. If you were one of them, here are some ways to help get your retirement savings back on track.
If you’re concerned about achieving your retirement goals after withdrawing funds from your super in 2020, you’re not alone. Three and a half million Australians accessed their super early under the Federal Government’s COVID-19 Superannuation Early Release program, which closed in December 2020.
First-time applications averaged $7,402. Repeat applications, and there were 1.4 million of them, averaged $8,268, according to the Australian Prudential Regulation Authority (APRA).
Fortunately, there are ways to make extra contributions to your super and help get back on track.
There are many ways to save for your retirement and topping up your super may be one of them.
Here are a few options to think about:
Depending on your circumstances, putting money into your super now may be a tax-effective way to save for your retirement.
Before making any decision it’s important you understand and consider what you might be eligible for based on your own personal circumstances and finances, including what super products you have, whether contribution caps apply, and what you can afford and are comfortable making. Speaking to a financial adviser can help you accurately assess your situation.
Contributions are subject to yearly caps. It’s important to be aware of these caps because if your total contributions exceed the caps, you may have to pay additional tax on the excess contributions. There are two main contribution caps:
Concessional contributions are super contributions made before-tax and include employer contributions such as super guarantee and salary sacrifice contributions. They also include personal contributions for which you claim a tax deduction. These contributions are taxed at the concessional rate of 15% (if you earn less than $250,000 including super contributions) or 30% (if you earn more than $250,000 including super contributions).
From 1 July 2023, the general concessional contributions cap is $27,500, for everyone, regardless of age.
Non concessional contributions are super contributions made from after-tax pay and include personal contributions you make into your super that are not claimed as a tax deduction, and spouse contributions.
From 1 July 2023, the non-concessional contributions cap is $110,000.
If you’re under 75, and your total super balance is less than $1.7 million as of 30 June 2023, you may be able to take advantage of the bring-forward rule. This rule allows you to bring forward up to two future years of non-concessional contribution caps into the current year and contribute up to $330,000 in a single year.
For more information about contribution caps, visit the ATO website.
Before 1 July 2022 people aged 67 to74 could only make personal contributions into their super if they satisfied the federal government’s ‘work test’. This test required you to have worked for at least 40 hours in a consecutive 30-day period within a financial year.
The government has abolished this rule, meaning people aged 67 to 74 can now contribute to their super whether or not they’re still working. However, the work test may still apply if you intend to claim a tax deduction for a personal contribution.
Once you reach age 75 you can’t make personal super contributions, even if you’re still working. However, you can still receive mandatory contributions an employer must make by law or under an industrial agreement.
If you’re eligible (and if your super fund allows it) you can also make a one-off ‘downsizer contribution’ from the proceeds of the sale of your family home.
If your super guarantee contributions are currently paid into another super fund and you would like to have it paid to your Resolution Life super account instead, you can download the form below and provide it to your employer. You’ll need your account number or product name to download the right form.
https://resolutionlife.com.au/findaform/choice-superannuation-fund-letter-compliance-online
If you have any questions:
Any advice and information on this website is general in nature and is provided by Resolution Life Australasia Limited ABN 84 079 300 379, AFSL No. 233671 (Resolution Life), which is part of the Resolution Life Group. Resolution Life can be contacted on 133 731 or via the contact us page. The advice does not take into account your personal objectives, financial situation or needs. Therefore, before acting on the advice, you should consider the appropriateness of the advice, having regard to those matters as well as the relevant product disclosure statement (PDS) or policy document, available from Resolution Life at resolutionlife.com.au or by calling 133 731, before making a decision about the product. Consider speaking to a financial adviser if you have any concerns.
If you decide to purchase or vary a financial product, Resolution Life and/or other companies within the Resolution Life Group will receive fees and other benefits, which will be a dollar amount or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.
Life Insurance Code of Practice
The Life Insurance Code of Practice is issued by the Financial Services Council (FSC) and sets out the life insurance industry’s commitment to high customer service standards, consistency and principles of conduct.
As a member of the FSC, Resolution Life supports the Life Insurance Code of Practice. You can find more information here.
[1] APRA, ‘COVID-19 Early Release Scheme - Issue 36’, 8 February 2021, accessed 25 August 2022.