Planning financially for a career break

A pause in super contributions can have long-lasting effects. Here’s how to plan ahead for super breaks.

There’s a host of reasons why people take career breaks.

Having and raising children, or taking an extended holiday or sabbatical, are the most common reasons.

Vanguard’s 2023 How Australia Retires study, based on a survey of more than 1,800 working and retired Australians, found that 2 in 5 current working-age Australians (40%) expected to take some form of extended break from work during their career, probably between their twenties and fifties.

Of those surveyed, 1 in 2 people under 35 years old expected to take parental leave, especially in their thirties.

Of course, in most cases, stopping work is likely to have some financial consequences. In the context of retirement specifically, taking a career break will probably result in reduced or paused employer superannuation contributions during that time and the same for personal super contributions.

However below are six steps that could be used to lessen the impact of a career break on a super balance. They could be taken beforehand, afterwards or both.

1. Make pre-tax contributions

All working Australians can contribute up to $27,500 per financial year into their super at a concessional tax rate of 15%. This includes employer and concessional personal contributions. An effective way to make extra contributions into your super is by setting up a salary sacrificing arrangement with your employer so extra payments are deducted from your pre-tax earnings.

2. Make after-tax contributions

If you’ve come into some extra money where the tax has already been paid, such as from an asset sale, you may be able to take advantage of after-tax contributions. The government allows non-concessional contributions of up to $110,000 each financial year. Also, under what’s known as the “bring-forward” rule, you may be able to make a non-concessional contribution of up to $330,000 in one financial year. This prevents any further non-concessional contributions for the next three financial years.

3. Make super catch-ups

You may be able to take advantage of unused pre-tax contributions you have from previous financial years, on a five-year rolling basis. This means you could potentially contribute more than the annual $27,500 concessional contributions limit in a single financial year. However, to do so, you would need to make concessional contributions in a financial year that exceed the annual limit, and your total super balance must be below $500,000 as at 30 June of the previous financial year.

4. Receive a government co-contribution

If you make a personal super contribution, you may be eligible for a matching contribution from the federal government of up to $500. For more information, check the Australian Tax Office’s (ATO) website.

5. Receive a low income super tax offset

The Low Income Superannuation Tax Offset, or LISTO, assists eligible workers earning $37,000 a year or less. It can be worth up to $500 per year and is paid automatically by the ATO into your super fund account.

6. Split superannuation with your spouse

The ATO allows couples to split up to 85% of their annual employer concessional contributions, as well as additional salary sacrifice and personal super contributions. The full guidelines around splitting, including eligibility and the application form that needs to be completed, are also available on the ATO’s website.

Superannuation and retirement planning is a complex area.

Take care to understand the contributions types and limits carefully as there are significant tax penalties for exceeding the applicable contributions caps.

If you’re unsure about your options and need some advice on how to maximise your retirement nest egg, consider consulting a licensed financial adviser who can provide you with personalised advice.

We’re here to help so speak to us today. 

This article has been reprinted with the permission of Vanguard Investments Australia Ltd. Copyright Smart Investing™

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) (VIA) is the product issuer and operator of Vanguard Personal Investor. Vanguard Super Pty Ltd (ABN 73 643 614 386 / AFS Licence 526270) (the Trustee) is the trustee and product issuer of Vanguard Super (ABN 27 923 449 966).
The Trustee has contracted with VIA to provide some services for Vanguard Super. Any general advice is provided by VIA. The Trustee and VIA are both wholly owned subsidiaries of The Vanguard Group, Inc (collectively, “Vanguard”).
We have not taken your or your clients’ objectives, financial situation or needs into account when preparing our website content so it may not be applicable to the particular situation you are considering. You should consider your objectives, financial situation or needs, and the disclosure documents for the product before making any investment decision. Before you make any financial decision regarding the product, you should seek professional advice from a suitably qualified adviser. A copy of the Target Market Determinations (TMD) for Vanguard’s financial products can be obtained on our website free of charge, which includes a description of who the financial product is appropriate for. You should refer to the TMD of the product before making any investment decisions. You can access our Investor Directed Portfolio Service (IDPS) Guide, Product Disclosure Statements (PDS), Prospectus and TMD at and Vanguard Super SaveSmart and TMD at or by calling 1300 655 101. Past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. This website was prepared in good faith and we accept no liability for any errors or omissions.
Important Legal Notice – Offer not to persons outside Australia
The PDS, IDPS Guide or Prospectus does not constitute an offer or invitation in any jurisdiction other than in Australia. Applications from outside Australia will not be accepted. For the avoidance of doubt, these products are not intended to be sold to US Persons as defined under Regulation S of the US federal securities laws.
© 2024 Vanguard Investments Australia Ltd. All rights reserved.

Share this post