Checking In On Your Superannuation: A Mid-Year Review

Superannuation remains one of the most critical components of retirement planning for Australians.

Given its importance, it is advisable to review your superannuation periodically rather than waiting until the end of the financial year.

A mid-year review, particularly around January, provides an opportunity to assess contributions, investment performance, and associated fees while still having sufficient time to make strategic adjustments.

Checking In On Your Superannuation:
A Mid-Year Review

We outline why conducting a superannuation mid-year review is essential, how to undertake one effectively, and actions you can take to optimise your retirement savings.

Why Conduct a Mid-Year Superannuation Review?

Regularly monitoring your superannuation ensures it remains aligned with your financial objectives and retirement goals.

A review halfway through the financial year allows you to:

• Track Contributions: Ensure you are on course to meet the annual concessional (pre-tax) contribution cap of $27,500 (Australian Taxation Office [ATO], 2024).
• Maximise Tax Benefits: Adjust contributions to potentially lower your taxable income and benefit from tax concessions.
• Assess Progress Towards Retirement Goals: Evaluate if your current super balance is sufficient for your intended retirement lifestyle.
• Evaluate Investment Performance: Identify underperforming investments and consider realigning your strategy.
• Review Associated Fees: Excessive fees can significantly diminish your balance over time.

How to Conduct a Thorough Superannuation Review

A comprehensive mid-year review should cover several key areas:

1. Review Contributions

• Employer Contributions:
  Confirm your employer is making the correct Superannuation Guarantee (SG) payments, currently 11% of your ordinary time earnings (Fair Work Ombudsman, 2024).
• Personal Contributions:
  Check if your voluntary contributions are within the concessional and non-concessional caps.
  Over-contributing can result in excess contributions tax.
• Catch-Up Contributions:
  If your total super balance is below $500,000, you may carry forward unused concessional cap amounts for up to five years (ATO, 2024).

2. Assess Fund Performance

• Investment Returns:
  Review your fund’s six-month investment returns and compare them against industry benchmarks.
• Risk Alignment:
  Reassess if your investment strategy (e.g., conservative, balanced, growth) matches your risk appetite and retirement timeline.

Example: If your portfolio is predominantly invested in growth assets and you are approaching retirement age, it may be prudent to shift towards a more conservative allocation to protect accumulated savings.

3. Examine Fund Fees

According to the Australian Prudential Regulation Authority (APRA, 2023), excessive fees can erode returns over time.

Check the following:

• Administration fees
• Investment management fees
• Insurance premiums

Consider switching to a lower-fee option if your fund’s costs are high relative to its performance.

4. Update Beneficiary Nominations

It is crucial to ensure that your nominated beneficiaries accurately reflect your current wishes.

Life events such as marriage, divorce, or the birth of a child warrant immediate updates.

Adjusting Your Superannuation Strategy

If your mid-year review reveals areas for improvement, there are several adjustments you can implement:

Increase Voluntary Contributions

If your contributions are below the $27,500 concessional cap, consider salary sacrificing additional amounts.

Voluntary personal deductible contributions may also offer tax deductions (ATO, 2024).

Switch Investment Options

Should your fund’s returns consistently underperform, consider shifting investment options or changing superannuation providers.

Be mindful of any exit or entry fees that may apply.

Reassess Insurance Cover

Many super funds provide default insurance, including life, total and permanent disability (TPD), and income protection cover.

Ensure the coverage matches your personal circumstances.

Higher premiums can substantially impact your retirement savings if not managed carefully.

Consolidate Super Accounts

If you have multiple super accounts, consolidating them can help reduce duplicate fees and streamline management.

However, assess whether you might lose valuable insurance cover attached to an existing fund before consolidating.

An Example of Fringe Benefits Tax (FBT) Impact on Superannuation

FBT can intersect with superannuation where salary packaging arrangements are involved.

For instance, an employee may elect to salary package a car under a novated lease, which attracts FBT.

If not structured correctly, this may reduce the amount of salary available for superannuation contributions (salary sacrifice) and impact retirement savings.

Proper structuring of salary packages is essential to ensure contributions to super are maximised while managing FBT obligations appropriately (Australian Taxation Office, 2024).

The Benefits of a Superannuation Mid-Year Review

A proactive review halfway through the financial year allows you to:

• Maximise contribution opportunities
• Optimise tax outcomes
• Enhance investment returns
• Ensure alignment with personal and family goals
• Prevent unnecessary fees and insurance costs

By taking action now, you can make meaningful improvements to your superannuation, leading to a stronger and more comfortable retirement outcome.

In Summary…

Superannuation is a long-term investment that benefits from regular and strategic oversight.

A mid-year review offers a valuable checkpoint to ensure you are on course to meet your financial goals.

Small adjustments now can make a significant difference over time.

If uncertain about the best course of action, consult a licensed financial advisor or seek guidance from your superannuation provider.

 

Disclaimer For External Distribution Purposes

The information contained in this publication is for general information purposes only, professional advice should be obtained before acting on any information contained herein. The receiver of this document accepts that this publication may only be distributed for the purposes previously stipulated and agreed upon at subscription. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.

References:

• Australian Taxation Office (ATO). (2024). “Superannuation contribution caps.” Retrieved from https://www.ato.gov.au
• Australian Prudential Regulation Authority (APRA). (2023). “Annual Superannuation Bulletin.” Retrieved from https://www.apra.gov.au
• Fair Work Ombudsman. (2024). “Superannuation.” Retrieved from https://www.fairwork.gov.au
• Australian Taxation Office (ATO). (2024). “Fringe Benefits Tax (FBT) and Superannuation.” Retrieved from https://www.ato.gov.au