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How going part time could impact your Super

December 13th, 2016

Almost one-third of Australian workers are part time, up from 28 per cent a decade ago.

For some it’s because it’s all that’s available to them, but for many others it’s a lifestyle choice. It might be to spend more time with pre-school children, it might be to care for a family member or it might be to take some time to relax, pursue a passion and smell the roses.

Whatever the reason, if you’re considering moving into part time work, you should take steps to ensure your super doesn’t take a hit and you can still be smelling those roses after retirement.

Whichever way you slice it, putting less money into your super via compulsory employer contributions will result in a lower balance at retirement if you don’t take action. For example, a 45-year-old with a super balance of $150,000 earning $100,000 in full time work could expect to retire at 65 with a super balance of $470,000. If that person went to three days a week their super balance would take a $90,000 hit.

A 40-year-old worker earning $60,000 a year with $40,000 in super could expect to retire at 65 with $209,000, but if that worker halves their income by going part time, that retirement sum drops to $167,700.

The answer is topping your super up, using every method open to you. If going part time means your income will drop below $36,021 you become eligible for a Government co-contribution. This means the Government will add 50 cents to your super for every dollar you contribute, up to a maximum of $500.

The amount the Government contributes drops as your income rises, and disappears entirely if you earn more than $51,021. The contributions can only be made from after tax monies, and not via salary sacrificing.

You should consider using any amount of unexpected funds for this purpose, whether it’s an inheritance, the sale of an asset, or even the proceeds of a garage sale. Every bit helps.

Salary sacrificing is another option worth exploring. It might sound like something for high income earners, but in fact even a small contribution via salary sacrifice can have a big impact on your final balance.

One major benefit of salary sacrificing is the contributions you make are taxed at just 15 per cent. This means if you salary sacrifice just $20 per week, your take home pay will only be reduced by $13.10 per week. But for a person earning $50,000 per year with $40,000 in super, that small weekly contribution should result in an extra $44,000 at retirement at age 67.

And finally, if your partner is in a position to contribute to your super, they could earn an 18 percent tax offset of up to $540 on on amounts up to $3000. This can be done by splitting your partner’s employer’s contributions via your two super accounts, but is only available to you if your assessible income is less than $13,800.

First Super commissioned The New Daily to research and write this article. The views expressed are of The New Daily.

This publication was issued by First Super Pty Ltd (ABN 42 053 498 472, AFSL 223988), as Trustee of the First Super superannuation fund (ABN 56 286 625 181). It does not consider your personal circumstances and may not be relied on as financial advice. Content was accurate at the date of issue, but may subsequently change.