Nine steps to boost your super

As tax time creeps up, now is the time to get your super in order and take advantage of potential opportunities. Here’s how to boost your super when working in the arts.
Nine steps to boost your super

The precarious nature of our work often contributes to a fear that working in the arts means retiring without the support of superannuation.

It’s harder, sure; but with the right advice, information and some planning, it’s possible for people employed in the arts to accumulate super.

The nature of freelance work can make it difficult to establish a decent amount to see you into retirement. But this doesn’t mean it is impossible, said Media Super Regional Manager (Growth) John Myers.

‘Given the level of creativity that people within the arts generally display, they also need to approach super in a creative way and work within the framework that exists, because there are ways they can save for their super.’

We spoke with Myers to help us cut through the jargon and understand how people who work in the arts can save superannuation and set themselves up for a financially secure retirement.

Whether you’re a freelancer or an arts industry worker, just starting out in your career or beginning to consider your retirement options, here are nine strategies you can start using today.

1. Know where you stand

The first step is finding out where you fit in the superannuation landscape.

‘It’s sometimes difficult for people to know what they actually are – whether they’re an employee, an independent contractor, or somewhere in the middle,’ said Myers.

‘Quite often people get paid super and it’s a bit of a surprise, or sometimes they expect to get super but they don’t because of the nature of the contract and working arrangements.’

A quick word with your accountant or using the ATO’s Employee/contractor decision tool can help you find out exactly where you stand and what you are entitled to.

2. Read up

Just as important as knowing where you stand, is learning about how super works. Under super regulations, an employer has to make the minimum Superannuation Guarantee (SG) payments on your behalf if you’re aged 18 or over and you earn at least $450 per month (before tax, from a single employer).

Media Super has an overview of the conditions for freelance and self-employed individuals and general regulations to help you brush up.

3. Make a voluntary contribution

Put simply, one of the best ways to increase your superannuation is to put more money into your account. This is a must for freelancers who don’t have an employer adding dollars on their behalf.

‘It is really about keeping super in mind so that when you do get paid your first thought is to put something aside,’ said Myers.

If you’re an employee, there are two ways to make voluntary contributions depending on your work circumstances. You can contribute before tax by setting up a salary sacrifice arrangement with your employer, which has the additional benefit of potentially putting you into a lower tax bracket if your take home pay is reduced enough. Alternatively, you can make after-tax contributions, which may entitle you to the government’s co-contribution scheme – see point five for more information.

To find out more about the different types of voluntary contributions and how different contributions can boost your super balance, try Media Super’s contribution calculator.

4. Claim a tax deduction

If you’re a freelancer and make voluntary contributions to your super, you may be able to claim part of these back as a tax deduction.

When an employer makes contributions for you (or you salary sacrifice), these contributions are taxed at only 15%. Unfortunately, the process isn’t quite as simple if you’re self-employed since the majority of your contributions are ‘voluntary’ and made after tax.

‘Freelancers receive an income and are either paying tax or putting money aside for tax, then they take money from their “take-home pay” to make superannuation contributions,’ said Myers.

But if you’re earning 90% or more of your income as a self-employed freelancer (or what the ATO refers to as an ‘independent contractor’), the end of the financial year is when you can potentially claim a tax deduction for your super contributions.

‘At the end of the financial year you can catch up with your accountant and say, “Okay, I’ve put x amount of dollars into my superannuation based on the level of money that I’ve earned. How much should I claim as a tax deduction?” And the accountant can advise what you can claim.'

If you do plan to claim your contributions back on tax, you will need to submit a form to your super fund to inform them, and have received an acknowledgment from your fund, before you lodge your tax return.

5. Get a top-up from the government

The government co-contribution is another incentive that can encourage people to make voluntary contributions. It assists low and mid-income earners by giving them a top-up on their super (tax free!).

When you lodge your tax return, the government calculates the amount on a sliding scale depending on how much you earn and how much you contribute.

‘Anyone earning less than $50,454.00* has the possibility of getting up to an extra $500 from the government. The good thing is, this applies to both employed workers and freelancers,’ said Myers.

Visit the ATO website for more information and to see if you are eligible for the government co-contribution.

6. Claim the spouse rebate

If you’re married or in a de-facto relationship and you earn less than $13,800*, your spouse can make contributions to your super account on your behalf. Spouses who make the extra after-tax contributions for their partner are then eligible for a tax offset of up to $540 each year.

The tax rebate also depends on how much the receiving spouse earns. If they earn less than $10,800 the rebate is 18%, but if they earn between $10,800 and $13,800 a partial rebate applies (conditions apply).

7. Have one super fund

Because art professionals often take on short-term roles, you can wind up accumulating multiple super accounts. But as new employers set up new accounts for our super, previous accounts start to be eaten away by account keeping fees and possibly insurance premiums. By rolling your accounts into one you reduce the amount of fees you pay and can end up with significantly more super in the long run.

‘Make sure you know where your super is. Then seriously have a look at which is the one fund you want to keep, and what the pros and cons of rolling them all together are,’ said Myers.

‘Trying to get everything in the one place to reduce fees and charges is usually a good idea, but you have to consider a few things, such as insurance cover you may have at various funds, and what cover will you lose if you combine accounts?’

Learn more about combining your super.

8. Use a transition to retirement (TTR) strategy to boost your super and pay less tax

If you are over 56 and thinking about retiring, a TTR strategy can be an effective way to pay less tax on your super and ease into retirement.

‘One of the benefits of a transition to retirement pension is the interest your pension account earns isn’t taxed; whereas with superannuation, when you earn interest the government takes 15% tax, plus Medicare,’ said Myers.

‘There are many potential benefits of using a Transition to Retirement Pension strategy. As these benefits will vary depending on your circumstances, it’s a good idea to have a chat to a financial adviser.’

Find out more about transition to retirement.

9. Average your income

People working in the arts could also ask their accountant about whether or not they can use income averaging.

Myers explained this strategy is useful for many artists who may suddenly have a higher income in one year. ‘Say you have two quite lean years and then all of a sudden you sell a few paintings or works and have a really good year, you can talk to an accountant about the possibility of averaging that income over a couple of financial years just to minimise their tax.’

Have questions?

If you have any questions about your super and how you can boost your super balance, give the Media Super team a call on 1800 640 886.

Or you can head to one of Media Super’s member seminars next month to find out more about planning ahead now for retirement adequacy. You’ll have the opportunity to talk to your local Business Development Manager and a Media Super financial planner#.

*Applicable for the 2015-16 financial year.

#Media Super has engaged Industry Fund Services (IFS) ABN 54 007 016 195 AFSL No 232514 to facilitate the provision of financial advice to members of Media Super. Advice is provided by one of our Financial Planners who are Representatives of IFS. Fees may apply. Further information about the cost of advice is set out in the relevant Financial Services Guide, a copy of which can be obtained by calling IFS on 1300 138 848. IFS is responsible for any personal advice given to you by its Representatives.

This article provides general information only, and does not take into consideration your personal objectives, situation or needs. Before making a decision to combine your superannuation, you should consider any penalties such as exit fees, change to insurance cover or loss of benefits that may apply and, if necessary, consult a qualified financial adviser. Before making any financial decisions you should first determine whether the information is appropriate for you by reading the relevant Product Disclosure Statement and/or by consulting a qualified financial adviser. Issued by Media Super Limited (ABN 30 059 502 948, AFSL 230254) as Trustee of Media Super (ABN 42 574 421 650).

Brooke Boland

Tuesday 12 April, 2016

About the author

Brooke Boland is a freelance writer based on the South Coast of NSW. She has a PhD in literature from the University of NSW. You can find her on Instagram @southcoastwriter.