10 hidden perks that make your super account even better

Super provides a simple way to reduce the amount of income tax you pay each year.

By setting up a salary sacrifice arrangement with your employer, you can swap the income tax rate you would normally pay on some of your earnings with the lower 15% super contributions tax rate. For more information, see SuperGuide articles Salary sacrifice and super: How does it work? and How do tax-deductible superannuation contributions work?.

If your employer is not on board with salary sacrifice, then consider making a voluntary personal contribution and claiming a tax deduction. Since 1 July 2017, most people aged under 75 can claim a tax deduction for voluntary personal contributions they make into their super account up to the annual concessional (before-tax) contributions cap of $25,000 (in 2019/20).

2. Avoid having a medical for insurance

Most large super funds automatically offer new members death and total & permanent disability (TPD) insurance cover without needing to undergo a medical examination, making it a great way to get insurance protection.

Automatic cover can be a real benefit for people unable to obtain cost-effective cover outside super due to age, or ill health. It can also be valuable if your annual premium is likely to include exclusions due to pre-existing medical conditions (such as heart problems or diabetes). For more information, read SuperGuide article Life insurance through super: A definitive guide.

3. Ensure your money goes where you want

Disgruntled family members challenging super death benefit payments are becoming increasingly common. If you use a binding death benefit nomination (BDBN) for your super account, you can ensure your super death benefit goes to the people you intended when you die.

A correctly made BDBN provides certainty your death benefit will be paid in accordance with your wishes, as the nomination is much less likely to be successfully challenged by a disgruntled beneficiary.

For more about death benefits, read SuperGuide articles:

• Who gets your super when you die? A guide to death benefit nominations
• Reversionary pensions: What they are and how they work
• A simple guide to what tax is payable on super death benefits

4. Pay less tax on your investment returns

Super funds work as a tax-effective ‘wrapper’ around your investments and this concessional tax treatment can create valuable tax savings if you earn a higher income.

Income generated by investing outside the super system in your own name is taxed at your normal marginal tax rate. Within the super system, however, income from the same assets is taxed at the lower rate of 15% (and any capital gains at 10% if the assets are owned for at least 12 months).

For more information, read SuperGuide articles Super for beginners: How superannuation is taxed and Income tax: Australian tax brackets and rates (2018/19 and 2019/20).

5. Cheaper insurance cover for members

Since most publicly offered super funds purchase insurance policies for their members in bulk, they can often negotiate a cheaper deal with insurers. In many cases, this makes insurance cover bought through your super fund far more cost-effective than buying it elsewhere.

Paying for insurance through your super fund also makes budgeting easier, as the premiums are automatically deducted from your super account. That way you don’t have to find extra money to pay for the premiums when they are due, although it does eat into your retirement savings.

For more information, read SuperGuide articles:

• Super funds with the lowest fees for life and TPD insurance
• Super funds with the lowest fees for income protection insurance
• How to compare super funds in 7 easy steps

6. Protection against bankruptcy

Holding your retirement savings in a regulated super fund generally means your super benefits are protected from your creditors if you are declared bankrupt.

This protection can be important (particularly for small business owners and professionals) in the event something goes wrong with your finances. Superannuation payments you receive before you go bankrupt, however, are not protected.

7. Free money from the government

If you make non-concessional (after-tax) contributions into your super account, you could receive a bonus top-up from the federal government, called a co-contribution. Depending on how much money you earn, this co-contribution is tax-free cash paid directly into your super account to supplement your retirement savings. To receive the co-contribution, your super fund must hold your tax file number.

For more information, read SuperGuide article How a government co-contribution can help boost your super savings.

There is more free money on offer if you are eligible for the Low Income Superannuation Tax Offset (LISTO), which was previously called the Low Income Superannuation Contribution. If you’re eligible and earn up to $37,000, this is a payment of up to $500 from the federal government directly into your super account. For more information, read SuperGuide article LISTO (Low Income Superannuation Tax Offset): Refund of super tax for low income earners.

8. Tax-free income in retirement

Once you retire on or after age 60, you are normally eligible to receive your super fund pension or lump sum without paying tax.

Super in retirement offers two key benefits:

• Regular benefit payments without income tax paid as an account-based pension
• No tax payable on the investment earnings or capital gains on the investment assets supporting your retirement phase pension.

Although the investment earnings supporting retirement phase pensions are tax-exempt, since 1 July 2017 retirees can only transfer a maximum of $1.6 million into a tax-free retirement phase account to pay their pension.

For more information, read SuperGuide articles Over age 60? A simple tax guide to accessing your super benefits and Definitive guide to the $1.6 million transfer balance cap.

9. Continuing insurance cover

Most large super funds allow you to continue your insurance cover even if you switch jobs. This can be valuable if your super fund offers high levels of insurance cover difficult to obtain elsewhere.

Even if you cease being a member of your super fund, many insurers offer you the option of continuing your insurance policy at your own expense by switching to a personal policy. This allows you to obtain the same level of cover without having to produce evidence about your health. For more information, read SuperGuide article Insurance inside super: A definitive guide.

10. Ability to invest in bigger assets

By pooling your retirement savings with other members in a large super fund or SMSF, you can invest in assets you wouldn’t be able to access as an individual investor.

With a bigger pot of money to invest, super funds can make investments that would be difficult for individual investors with smaller sums to access, such as taking stakes in a motorway, office tower, or wholesale investment such as corporate bonds.

For more, read SuperGuide articles Super investing for beginners and How investing in infrastructure boosts your super account.