“Free money” and other incentives make a difference

There are several strategies that can help women close the gender super gap (see case studies), according to Craig Sankey, head of technical services and advice enablement at Industry Funds Services.

Government co-contribution

“This is the first port of call for low- to middle-income earners. It’s free money from the government and it’s an extremely effective strategy,” he says.

If you earn less than $38,564 and you contribute $1000 to super, the federal government will put $500 into your super account. If you earn more than that, the co-contribution reduces progressively until it finally cuts out at $53,564.

To be eligible, you need to meet the requirements of an income test. “If you’re at home for the whole financial year and not working that year, you’re not eligible for the co-contribution,” says Sankey. “But if you earn a tiny bit of income – at least 10% from employment or self-employment – you will qualify,” he says.

Unused concessional contributions Since July 2018, anyone who hasn’t fully used their concessional (before-tax) contributions allowance has been able to carry forward the unused amounts and make larger contributions in future years.

Sankey says the measure was introduced to help people, especially women, rebuild their retirement savings after periods out of work to care for children or elderly relatives.

“If you’ve been out of the workforce or had a part-time job, when you go back full time, if you haven’t fully used the annual $25,000 cap in previous years, you can carry forward the unused amounts for up to five years,” he says.

“As long as your balance was below $500,000 at the previous June 30 you can accelerate your contributions. It’s a very good way for people coming back into the workforce, or approaching retirement, to build up their nest egg.”

Spouse contribution

Another incentive to help boost your super comes via a spouse contribution. “If your partner has some money sitting in a bank account and they’re going to have a tax liability, this is a good way to bring their tax down and boost your super,” says Sankey.

“If you are earning less than $37,000 and your spouse makes a $3000 nonconcessional contribution into your account, they can get a tax offset of $540 in their tax return for doing so.”

A lower tax offset may be available if the contribution is less than $3000 or you earn more than $37,000 but less than $40,000. Your “total super balance” must be less than $1.6 million.

Sankey says couples should discuss their super together and look at ways to maximise their benefits. “Most people are on a marginal tax rate higher than 15%, which is what gets charged on SG going into super. There are caps on super contributions because it’s such a tax-effective way of saving for retirement.”

From July 1, the caps will be increased. The transfer balance cap will rise to

$1.7 million, the non-concessional contribution cap to $27,500 and the non-concessional cap to $110,000.

Anyone who is unsure how the super rules work can call their fund for assistance. “It can assist them and provide them with a certain level of advice or intra-fund advice, which is usually free and covered by their admin fee,” says Sankey.