Considering time off from the workforce? How could you manage your super if so?
If you are considering putting your current career on pause, there are a range of options to keep your super working while you’re on a break.
1. Preparing your super before taking a break
A viable option is to make additional contributions towards your super prior to taking time off. You might consider salary sacrificing. When you salary sacrifice you make an agreement with your employer to pay a portion of your salary straight into your super account instead of your bank account.
This could also help you reduce your taxable income. These extra contributions are taxed at a special rate of 15%. However, it is important to consider that there is a maximum amount that you can contribute to super annually which is $25,000 p.a., this includes your employer’s 9.5% super guarantee (SG).
2. Locate all your super before taking a break
Think about all the super accounts you have had during all these years. Could there be lost super out there in your name? If you have had more than one job, then there is a chance you may have accounts with more than one fund.
It is a good idea to consider combining all of your super accounts into one. Not only makes it easier to manage but also you could save on fees.
Take into consideration the insurance cover you have within your super as well. In some circumstances, insurance cover linked to the super lapses if there are no contributions or if that account falls below a specified balance threshold.
3. Super as a partnership
If you have a partner, and they are going to continue working while you take time off work, there are ways your partner’s superannuation can help you. This can be done by:
- A Spouse Contribution to your super account
- Arranging for Contribution Splitting (also known as Super Splitting)
You may be able to maximise your balance with Spouse Contributions. If you are earning below $40,000 per year, your spouse could benefit from a maximum tax offset of $540 in case they make a contribution on your behalf of $3,000 to your super account.
In addition, your spouse can split their employer super contributions with you. Contribution splitting is a method of adding to your superannuation that allows your partner to transfer some of their before-tax super amount into your account. This can only be done after the financial year in which the contributions were made.
Planning ahead for a career break and finding ways to contribute to your super before you take time off can help give you peace of mind during your time away from work and you also keep your balance growing.
Sources
[1] AustralianSuper (n.d.), Superannuation for those taking a career break, https://www.australiansuper.com/superannuation/superannuation-articles/2018/08/super-tips-for-career-break
[2] AustralianSuper (n.d.), Start salary sacrificing, https://www.australiansuper.com/superannuation/grow-your-super/salary-sacrificing
[3] Australian Taxation Office (2018), Contributions splitting, https://www.ato.gov.au/Forms/Contributions-splitting/
[4] Industry Super Funds (2018), Spouse Contributions, https://www.industrysuper.com/understand-super/tax-and-super/spouse-contributions/
