As a new year rolls on, it’s always a good time to consider your super to maximise your retirement benefit. We all want a glorious and dignified retirement – and well deserved after a lifetime of hard work. Here are some things to think about.
The Super Guarantee (SG) is the amount of super your employer is required to pay from your gross salary. It moved up in 2023 from 10.5% to 11%. Increases up to 12% had been planned but were blocked by the Abbott Coalition government on the grounds that employers could not afford to pay super increases.
This blockage caused a serious loss to workers’ retirement balances. Now, however, SG increases have been approved and in July the increase will move up to 11.5% of gross salary. The final increase will happen in July 2025 when the SG hits the magic 12%. So your employer super contribution will automatically increase this year and next year.
And don’t forget that your concessional tax contribution cap (including your employer’s contribution) is $27,500 this year. This figure matters if you are planning to take advantage of the tax concessions available through salary sacrificing.
Performance Test
Other changes include the enhanced Performance Test which the regulator (APRA) is co-ordinating to ensure greater transparency of superannuation funds.
The value of the Performance Test is clear as the number of underperforming funds has been decreasing since its introduction in 2021.
You can check your fund’s performance and compare it to how other funds with the same asset allocations have performed. It’s a good idea to check the one, three and five year performance tables to see how your fund is performing against its peers. Keep in mind that if you are in a ‘balanced’ option the asset allocation is usually between 60% and 80% growth assets.
In 2023 only one ‘default’ product failed the performance test. However, several ‘choice’ products have not met the regulator’s standard in terms of returns. In this case fund members have been issued with a letter declaring their fund has been classified as an underperformer. A notification should be seen as a red flag for members to have a serious look at their fund’s performance.
Wage theft
In another change to be aware of, the ATO was allocated $27 million to strengthen its power to track down unpaid super. This has been a chronic problem and I recall that my first job in superannuation was investigating employers who failed to pay the correct amount of super. It amounted to wage theft as at that time some employers considered super as an extra payment which did not have to be paid with a salary.
Workers would receive a notification on their pay slip that super had been paid, but it was not actually paid at that time. Thankfully, that situation has improved and now employers, especially larger employers, pay super on a fortnightly basis along with salary. But some industries have serious issues with the non-payment of super especially in the cases of businesses closing down. As it stands, there is still a significant amount of unpaid super owed to Australian workers.
Insurance
Another matter to consider at the beginning of 2024 is your insurance. Superannuation funds generally provide default insurance to eligible members as a genuine benefit. In most cases, eligible members do not have to provide medical information to obtain default insurance as long as they meet the insurer’s requirements. Funds often provide death cover (life insurance), TPD (total and permanent disability) insurance and income protection. Members can apply for additional cover or can decline cover completely.
Consider your situation – health status, debt and levels of current cover. Insurance through super aims to help address Australia’s under-insurance problem and has assisted thousands of families in times of death, injury or accidents.
If you have any questions about your insurance cover, check with your fund. You will be able to obtain professional help to assist you in having the correct level of cover for your situation in life.
Let’s hope that 2024 brings you health, happiness and prosperity!