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What Happens to My Superannuation During Unemployment?

If you’re employed right now, you’re probably enjoying the perks of receiving employer Superannuation Guarantee Contributions into your super fund.

But what happens when you decide to take a sabbatical? Say, long-term travel plans or a radical change of lifestyle? At that point, you’ll have to take complete charge of your super payments.

Inaction on your super can result in the investment earnings being eaten up by fees and insurance premiums, ultimately affecting your long-term retirement outcome. In this article, we’ll be discussing what happens to your super during long periods of unemployment and what you should do in between. Read on!

Changes to Your Super During Unemployment

In most cases, there won’t be any change in your super if you’re unemployed. The critical difference is that you’ll no longer receive contributions from your employer, which may affect your balance build up.

If you have salary continuation insurance, it may no longer be valid unless your reasons for taking a break are injury or illness.

Furthermore, because being employed or self-employed is one of the major requirements, you will not be eligible for any government co-contribution.

Unemployment may also influence your final payout if you are a member of a defined benefit superannuation fund. A defined benefit superannuation system utilises a formula to multiply your income by your years of service to calculate your benefits.

Is it Acceptable For Someone Else to Make Contributions for Me?

While you can’t combine your superannuation contribution with your partner’s, after-tax payments from your spouse may help you build your super amount. Your spouse qualifies for a tax credit of up to $540 if you earn less than $40,000 during the fiscal year.

What You Should Do With Your Super During Unemployment

Temporary Break

Take this Time to Compile and Organise Your Supers

Before or throughout your professional break, locate and compile all of your super.

While you’re on this break, you can take full advantage of it by locating and compiling all your super. You may have ”lost” super if you’ve worked multiple jobs over the years. As of June 2020, Australians have amassed over $13.8 billion in lost and unclaimed super, according to the Australian Tax Office (ATO).

It’s an excellent idea to consider placing all of your super in one location before or even during your long break. It might save you money on costs, prevent you from having multiple insurance policies, and make managing your super easier.

It is recommended that you seek professional advice to get assistance determining which super account/s (and insurance policies) you should keep.

Continue Your Super With Personal Contributions

If your cash flow and budget amenable you to run at a surplus you may want to consider making additional personal contributions to help keep you on track to secure your retirement pension.

Another source of income, such as investment profits, an inheritance, a gift, or even money from a job where you aren’t qualified for super contributions, can be used to make these payments.

Permanent Break

If returning to work is no longer on the agenda and you have reached your superannuation preservation age, an account-based pension may be a good option for you. Alternatively, you can also leave your superannuation money in the accumulation phase. The main difference is the tax rates applied to investment profits and the obligation to obtain minimum pension income payments from a pension account.

Keeping track of your super savings is always a smart habit, whether you’re transferring jobs or not. To prevent paying numerous premiums and management costs, aim to keep only the necessary accounts open. When switching insurance coverage, double-check what is covered. You’re ultimately responsible for making sure your super is on track or not.

To know more about tips in managing your finances during your retirement years, check out these posts:

Newcastle Financial Planning Group offers reliable superannuation advice so you can secure the retirement you want despite the financial roadblocks or life hiccups you may encounter down the road. Book a complimentary chat with us today!


Disclaimer: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Coastal Advice Port Macquarie and Sydney Wealth Advisers are subsidiaries of Coastal Advice Group which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.
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