Tips, tools and strategies

How much super is enough?

It's easy to find out how much super you need to pay your employees. But how much you should be putting into your own super account each year? The right amount of super you'll need depends on your individual circumstances - such as your current age, current income, desired retirement age, desired retirement income, and current super balance.

It's also a good idea to speak to a financial adviser. They can help you with strategies to make the most out of your super, and save more for your retirement.

Consolidate your super and save

Do you have multiple super accounts from when you were an employee? Well you're not alone. The average worker has approximately three or more super accounts. Over time, having multiple super accounts will erode your retirement savings, as you are most likely paying more in fees. Combining all your super into one account can reduce the fees you pay, and make it easier for you to manage and track.

By rolling your own super into a group plan for you and your employees, you may also be able to take advantage of the scale benefits of having multiple super accounts in one fund - potentially reducing your fees even further. For more information on starting a group super fund, click here.

Make tax-deductible contributions to super

If you're self-employed, you are generally eligible to claim your super contributions (both for you and your employees) as a tax deduction. For business owners, this can make super a tax-effective way to save - provided you're prepared to put this money away until retirement.

Take out insurance tax-effectively

To help Australians save for their retirement, the Government has implemented a number of tax concessions for superannuation. As a result, holding some of your life insurance inside super can be a tax-effective way to get the cover you need.

How does it work?

You hold your life insurance (usually death and TPD cover) inside your super account, and use your super contributions to pay your premiums.

Instead of purchasing a stand-alone insurance policy - where premiums are paid for from your after tax income - using your super contributions means you're effectively paying your premiums using pre-tax money.

How does insurance through super benefit you?

  • You may not have to find extra money to pay for your premiums, as they can be paid from your super fund account balance.
  • Tax concessions apply for most premiums paid.
  • Given the savings, you may be able to top up any stand-alone insurance policies (those you hold outside of super) and increase your overall coverage.
  • Your qualifying dependants can receive unlimited tax-free lump sum payments if you, the insured, pass away.
  • Premiums via group super plans can be cheaper because the super fund is buying the insurance 'in bulk'.

Are there any limitations?

  • When an insurance policy is held inside super, the super fund is the owner of the policy. That means any benefits are paid to the fund before they're paid to you or your beneficiaries. This could potentially slow down payment, and add an additional set of criteria you need to meet before the funds are released.
  • Eroding your super balance to pay your insurance premiums can reduce your long-term retirement savings. To avoid this, you might consider making additional contributions to your super to cover your insurance premiums.
  • Insurance benefits for policies held outside super are often paid tax-free - regardless of who receives it. The same rules do not necessarily apply for benefits paid via a super fund. For example, if a beneficiary is a non-dependant child or adult, a death benefit may be taxed at 16.5%.

To find out more about insurance for business owners, click here.