Making additional contributions to your superannuation account can greatly benefit your long-term financial health. Here are some straightforward steps to help you maximize your savings:

World Savings Day: A Timely Reminder

Each year, October 31 is recognized as World Savings Day, celebrating 100 years since its launch at the 1924 International Savings Bank Congress in Milan. It’s a reminder of the importance of establishing a savings strategy and setting aside funds, whether in a bank account or investments. In Australia, World Savings Day serves as a nudge to consider making extra contributions to your superannuation on top of the mandatory payments from your employer.

The Superannuation Knowledge Gap is a growing concern in Australia, as recent findings reveal that many Australians, especially millennials, lack a full understanding of how to maximize their superannuation benefits.

Employer Contributions and Tax Rates

Under Australian law, employers must contribute to their employees' superannuation at the current Superannuation Guarantee rate of 11.5% of a worker's salary. Individuals can make additional contributions up to the concessional limit of $30,000 per year, which are taxed at a favorable rate of 15%. This setup can be beneficial, especially if an employer's contributions don’t reach the limit, as individuals can top up their contributions to receive this tax advantage.

However, Vanguard's 2024 How Australia Retires research, based on a survey of 1,800 Australians, uncovered significant gaps in superannuation knowledge:

• 36% of respondents were uncertain whether superannuation enjoys a lower tax rate than other investments, while 9% mistakenly believed it did not.

• Although 76% knew they could make additional contributions, 24% were either unaware or believed they couldn’t.

Millennials and Superannuation

A roundtable by the Australian Securities and Investment Commission’s (ASIC) Moneysmart program found that millennials (born between 1981 and 1996) showed similar gaps in superannuation understanding:

• 40% of millennials were unsure of the fees they pay on their superannuation.

• 41% did not know or were unsure if super is taxed at a lower rate than other investments.

• 37% lacked a clear retirement plan.

• More than 50% were uncertain of the minimum age for accessing super.

Despite being the first generation to enter the workforce with compulsory superannuation from day one, millennials are reportedly less engaged with super than previous generations. ASIC noted that this lack of engagement reflects broader concerns about financial literacy and accessibility in the retirement system.

Additional Findings on Contributions

The Vanguard research also highlighted concerning trends across working-age Australians:

• Nearly half (49%) of working-age Australians have never made personal (extra) contributions to their super.

• 27% reported having no future plans to make personal contributions as part of their retirement strategy.

The findings point to a clear need for increased education and support to help Australians make the most of their super, especially given the complexity of rules governing concessional and carry-forward contributions. Addressing this knowledge gap could help more individuals take advantage of tax-efficient retirement savings, setting them up for a more secure financial future.

Ways to Boost Your Super

1. Concessional Contributions (Before-Tax Contributions)
   You can make concessional contributions from your pre-tax salary through salary sacrifice or contribute after-tax money directly to your super account. If contributing after-tax, you may be eligible for a tax deduction, as concessional contributions are taxed at 15%, which can be advantageous compared to higher individual tax rates.

2. Non-Concessional Contributions (After-Tax Contributions)
   These are personal contributions made after tax, separate from concessional contributions and subject to their own limit. The maximum non-concessional contribution limit is $120,000 per financial year, with the option to bring forward three years’ worth of contributions ($360,000 in one year).

3. Spouse Contributions
   Couples can split up to 85% of annual employer contributions, salary sacrifice, and personal super contributions, provided their super fund allows it. Splitting contributions can be beneficial for optimizing retirement funds and may allow tax benefits.

4. Consider Consulting a Financial Adviser
   Super and retirement planning can be complex, with strict contribution caps, age limits, and potential tax penalties for over-contributing. If you’re uncertain about your options, consulting a licensed financial adviser can provide tailored advice and ensure you make the most of your super strategy.

By understanding these options and setting up a strategy that works for you, you can take control of your financial future, building your retirement savings with confidence and peace of mind.

Rick Maggi CFP, Westmount Financial, Financial Advisor (Perth)

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Important note: While every care has been taken in the preparation of this document, Westmount Securities Pty Ltd (ABN 42 090 595 289, AFSL 225715) nor any other member of Westmount Securities Pty Ltd makes any representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs.