Recovering from a contributions break during the COVID-19 pandemic

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The COVID-19 pandemic has impacted all of us, and many people have experienced a change in their financial situation as a result. If your employment has been affected by COVID, you may have also experienced a break in super contributions.

Once your financial situation stabilises again, it’s a good idea to start rebuilding your superannuation to make up for any missed contributions or withdrawals you may have made. Even if you’re many years away from retiring, putting money into your super while you’re young can have a huge impact on the amount of savings you’ll have when you retire. You may even be able to take advantage of tax benefits from contributing to your super.

Here are some tips for rebuilding your super balance once your financial situation improves.

Consolidate your super accounts

If you’ve worked multiple jobs or been a freelancer, you may have super sitting in more than one fund. Each super account has fees attached to it, so if you have super in more than one fund, you may be paying multiple sets of fees unnecessarily. Over time, these fees can erode your super balance, reducing your overall retirement savings.

Additionally, your super earns interest on the entirety of the balance in your account—so if your super is split across multiple accounts and you’re paying multiple sets of fees, you may be missing out on earnings. By keeping all your super in one fund, you can maximise your compound returns because you’ll only be paying one set of fees and insurance premiums, meaning more of your money is invested and earning returns.

You can consolidate your super easily online using the Find my super tool, or by submitting the Combine and save form.

Learn more about consolidating your super

Track down any lost super

Super can become ‘lost’ if you change your name or address, and your fund is unable to contact you. If your account has had no contributions or rollovers in the past 12 months, and your super fund cannot contact you, your super will be sent to the Australian Tax Office (ATO) so you can claim it.

You can check for any lost super using the Find my Super tool in your online account, or on the ATO website through your MyGov account.

Find out more about reclaiming lost super on the ATO website

Make additional contributions

When it comes to your super, every little bit counts. Making additional contributions to your super is a great way to boost your balance when you have spare income. Even if you can’t make them regularly, additional contributions can make a big difference to the interest you earn on your retirement savings over time.

There are several types of additional contributions.

Before-tax (concessional) contributions

Before-tax contributions are additional contributions made from your pay as a salary sacrifice, before tax is deducted. You’ll need to discuss and set up salary sacrifice with your employer.

Learn more about making before-tax contributions

You may be eligible for the low income tax offset

If you earn $37,000 or less and make before-tax contributions to a complying super fund, you may be eligible for the Low Income Super Tax Offset (LISTO). The ATO will automatically calculate your LISTO when you submit your tax return, and if you are eligible, the ATO may deposit up to $500 into your super account.

Learn more about the Low Income Super Tax Offset

After-tax (non-concessional) contributions

After-tax contributions are additional contributions made from your take-home pay after tax has been deducted. You can make after-tax contributions as a one-off payment, or set up regular payments if your financial situation allows.

Learn more about making after-tax contributions

It’s important to note that before- and after-tax contributions are taxed differently. Learn more about making additional contributions and find out how contributions are taxed.

You may be eligible for government co-contributions

If you earn less than $54,837* per year and make a voluntary contribution to your super, you may be eligible for a government co-contribution of up to $500.

Learn more about the government co-contribution

Making spousal contributions

Spousal contributions are a great way to boost your partner’s super (or vice versa) if they’re not working, on parental leave, or earning a lower income. You can make a spousal contribution if you are married or in a de facto relationship, and your partner earns less than $40,000 per year. Spousal contributions are a form of after-tax contribution, and depending on your partner’s income, you may be eligible for a tax offset as a result of making a spousal contribution.

Learn more about spousal contributions

If you’ve been made redundant

Unfortunately, people have lost work as a result of the COVID-19 pandemic. If you’ve been made redundant, there are a number of things to consider when it comes to your super.

Check if your super is affected

If you’re a Media Super member, your existing super won’t be affected if you’re made redundant. Your insurance cover will continue for as long as you have sufficient funds in your account to cover the premiums—but it’s important to note that your Income Protection cover will cease if you remain unemployed for more than 12 months.

If you belong to your employer’s corporate fund and you’ve been made redundant, your super balance may be transferred to another fund run by the same administrator. If this happens, it’s important to check the conditions of your new fund so you can ensure your new super setup supports your lifestyle.

Here are a few things to look for in your new fund:

  • Fees and charges – are you being penalised with higher fees?
  • Investments – has your money been transferred to an investment option that suits your needs and your retirement goals?
  • Insurance – have you been provided with the same (or similar) level of insurance cover?

What to do with your redundancy payout

Typically, when you’re made redundant, you’ll receive a payout from your employer. The amount you receive will depend on your salary and the number of years you’ve been employed at that company.

Depending on your financial situation, you may need your redundancy payout to cover your day-to-day expenses, including bills, rent, or mortgage payments. If you’re looking for advice about how best to make use of your redundancy payout, our Helpline Advisors can provide limited advice, or connect you with a Financial Advisor for more information.

Get in touch with our Helpline Advisers today on 1800 640 886.

Learn more about what to do if you've been made redundant

Tips for freelancers and the self-employed

If you’re self-employed or working as a freelancer, your business may have taken a hit during the pandemic. While you may have had different financial priorities in the last year, it’s important not to forget about your super.

Making contributions

If you’re a freelancer or sole-trader, you are generally responsible for making contributions to your own super. If you’re undertaking contract work, you may be eligible for employer contributions depending on the structure of the contract and working arrangements. If you’re self-employed (employed by your own company), then the company must make super contributions on your behalf.

This can vary depending on the industry you work in. If you’re a performer or involved in performances, film, TV or radio you may be deemed to be an employee for superannuation guarantee purposes and the company engaging you is responsible for making super contributions on your behalf.

While super may be the last thing on your mind during tough financial times, it’s important to understand your obligations around super payments so you can ensure you’re setting yourself up well for retirement.

Learn more about who pays your super when you're self-employed or a freelancer

Claiming tax deductions for super contributions

If you’re self-employed and you make contributions to your own super, you can claim these contributions as a tax deduction. You can claim all your super contributions as tax deductions, provided they don’t exceed the contributions cap.

Learn more about claiming tax deductions for super contributions

Capital gains tax for small businesses

If you operate a business as a sole trader and you’ve had to sell off an asset that qualifies for the Retirement exemption, you can contribute some or all of the exempted capital gain from that sale to your super. Be aware that a lifetime limit of $500,000 applies, and any capital gains contributions beyond this will count towards your contributions cap.

Learn more about capital gains tax exemptions

Even if your super has taken a backseat during the COVID pandemic, it’s never too late to rebuild your balance. Making a few small changes now or taking advantage of tax breaks and government co-contributions can make all the difference when you reach retirement age. If you’re looking for more tailored advice about rebuilding your super after a contributions break, speak to one of our Helpline Advisers today.

You can also read our full guide to rebuilding your superannuation after COVID for more ideas and inspiration.

*Applicable for the 2021–2022 financial year