The compulsory superannuation guarantee (SG) rate – currently 9.5% – is set to increase over the next few years. But if you’re an employee, will relying on compulsory employer contributions be enough to meet your retirement goals? There are many steps that workers can take to boost their retirement savings.
SG contributions are the minimum super contributions that employers must make for their employees (to the extent the employee earns less than $216,120 per annum (indexed)). In line with long-term government policy to help Australians build retirement savings, the SG rate is scheduled to gradually rise to 10% in 2021-22, then to 12% in 2025-26.
But while this plan has been set in law, it’s possible these rate increases could vary in the future. There is significant disagreement about the optimal SG rate between the two major political parties, with the Coalition resisting the previous Labor government’s planned increases and Labor pushing towards a higher rate (eventually to 15%).
What should Australian workers make of this? Politics around the SG rate may be beyond our control, but individually, you can look for additional ways to boost your savings, that are appropriate for your situation. Here are some examples:
- Super co-contributions: Workers aged under 71 years with an income of $52,697 or less may be eligible for a government “co-contribution” of up to $500 when they make their own extra after-tax contributions to super. The lower your income, the more the government will chip in.
- Salary-sacrificed contributions: If you can handle a reduction in your take-home pay, arranging for your employer to pay part of your salary as an extra super contribution can both boost your super and save you tax; you will not pay personal income tax on the amount as it will instead be taxed within your super fund at 15%. Take care as these amounts count towards your $25,000 concessional contributions (CC) cap.
- Deductible personal contributions: If your employer does not offer a salary-sacrifice program, you can make extra contributions from your own after-tax income and then deduct these amounts in your tax return. These also count towards your CC cap.
Talk to us today about building your retirement savings and making your super work! As well as the tips above, we can help you explore the full range of measures available, including strategies to boost your spouse’s super, “downsizer” contributions and more.