Why Women Need To Think About Super

Superannuation is the nest egg you’ve worked so hard for -but it’s also something not many of us think about much, especially self-employed Australians.

There are 2.2 million business owners in Australia, with more than 1.4 million sole traders, says the 2020 Xero Boss Insights Report. As a business owner, you have so much on your plate that keeping up with super payments can fall by the wayside, which can have huge impacts on you later in life -especially for women.

According to Women in Super, women will retire with an average of 47% less super than men, despite living an average of five years longer than men. Why? There’s a range of reasons such as women working part-time, women taking an average of five years out of the workforce to raise children, or even women missing out on super contributions as they don’t meet the requirement of earning $450 monthly before tax from a single employer. Even full-time employed women earn 18% less than men.

So what can you do about it? We look at five ways to help you get super ahead (pun intended).

1. Pay yourself first

Paying yourself super is ensuring your best chance at a comfortable retirement. If you are self-employed paying yourself super can seem like an additional burden on your cash flow, but is an important consideration for your retirement.

There is a yearly cap on your pre-tax contributions of $27,500, but you can carry forward any unused concessional contributions for up to five years on balances under $500,000.

The Xero Boss Insights Report found two-thirds of new Australian businesses were founded by women. For self-employed women, you can contribute to super regularly by making voluntary concessional (deductible) contributions. Not only is contributing to your super tax-deductible income in the fund is only taxed at 15%. The top 5 funds have produced an average of 9.3% return over 10 years, whereas the current highest savings account only offers a 3% return per annum. Paying into your super fund can be as simple as setting up a BPAY or bank transfer. notifying your super fund of your intention to claim a tax deduction. Either your fund or the ATO has a ‘notice of intent to claim’ form you can fill in to jumpstart this process.

2. Your partner can contribute on your behalf

The federal government now allows people to split up to 85% of concessional super contributions (before-tax). Meaning your spouse can concessionally contribute (through salary sacrificing, if applicable) to boost your superannuation balance -especially helpful if you have taken time out of work to care for family or during maternity leave.

If your income for the financial year is $40,000 or less, your spouse can actually get a tax offset of up to $540 for any contributions they make to your super fund or retirement savings account. Spouse contribution splitting is available to married couples, defactos and same-sex couples.

3. Maximise the government contributions

For anyone earning up to $41,112, the federal government will automatically co-contribute a maximum of $500 when you make after-tax contributions up to $1000. It does mean that you can’t claim a tax deduction on your personal contributions -but it is some free cash deposited straight into your super!

4. Compare funds

A new government tool called YourSupercan helps compare the fees and returns of your super products. It’s also important to be aware of the fees and asset class of your fund. In your early career, it is considered wise to be invested more aggressively. This higher risk usually gives rise to volatility, but will usually achieve higher growth of the fund in the long term, says MoneySmart.

It’s also worth making sure you only have one super account. Multiple accounts mean multiple fees, insurances, and lower overall returns. According to SuperGuruyou can roll your super accounts into a single fund through your MyGov account or by asking your main super fund.

5. Leverage compound interest

The earlier you can add to your super balance the better -thanks to the magic of compound interest. We now work longer and live longer, meaning you’ll need more aside for retirement than ever before.

Super is just one aspect of getting financially fit. Book a FREE consultation with us to see how we can get your finances in top shape.

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