Super exists to help you save for retirement. In Australia, most people let theirs build behind the scenes with the help of contributions from their employers, but there are different ways to top up your super while also minimising the tax you pay.
We have put together a list of some of the main ways people can contribute to superannuation right now in Australia. This is a quick explainer; there are conditions and criteria involved with each so it is always worth having a chat with a financial professional to figure out which ones apply to you and are worth taking advantage of:
Employer superannuation contributions
Your employer is mandated by law to pay you superannuation. The current ‘Australian Super Guarantee (SG)’ rate is 10.5 per cent of your ordinary time earnings, and this is set to increase over the next few years. You have the right to nominate which fund your super goes into. It makes sense to stick with one fund, even as you change employers, as this will save you from paying fees for every account you have.
Employers do sometimes neglect to pay super. They can be penalised heavily for doing so but it’s worth checking that the money is going into your account and following up if you appear to be missing out.
Concessional contributions
If your employer pays you less than $27,500 in super per year, you may wish to pay extra into your superannuation, to minimise your overall tax. Concessional contributions made into your superannuation account are taxed at 15% (for individuals with Adjusted Taxable Income of less than $250,000). 15% is generally a lower rate than most individuals marginal tax rate.
Let’s say you earn $100,000 per year and add $10k into your superannuation. Very basically speaking, this reduces your taxable income by $10,000 saving $3,450 of personal tax. Tax in superannuation is $1,500, so you pay $1,950 less tax overall and increase your long-term savings.
You can opt to ‘salary sacrifice’ and have some of your pay go into super, or make your own deposits to take advantage of this option. If you make your own deposits, you will need to notify your superannuation fund of your intent to claim a tax deduction, using applicable forms and within time periods.
‘Catch-up’ concessional contributions
You can take advantage of catch-up concessional contributions if you haven’t used your entire pre-tax (concessional) contribution cap since the 2018-19 financial year, by contributing the remainder in future financial years.
From 1 July 2021 the pre-tax (concessional) contributions cap is $27,500 pa. From 1 July 2018, eligible members who contributed less than the cap can ‘carry-forward’ any unused amounts for up to five years.
To be eligible your total super balance needs to be less than $500,000 on 30 June of the previous financial year. Note, your total super balance is broadly the sum of all your super accounts including pensions.
Non-concessional contributions
Even after you have exceeded the concessional threshold, you can keep contributing to your superannuation using your after-tax income.
The standard non-concessional contribution cap is $110,000 for 2022–23. You can make non-concessional contributions if you have a total superannuation balance of less than $1.7 million on 30 June in the previous financial year.
Using the ‘bring forward rule’, members under age 75 may be able to make non-concessional contributions of up to $330,000 in a single year. Conditions apply, but you may wish to explore this if you sell an asset or have a significant sum of money and you think you can benefit by putting it into your retirement fund.
Downsizer contributions
Over 55 and want to sell a house you have owned for more than ten years? You may be eligible to contribute up to $300,000 into your super. You will need to deposit the funds and submit the paperwork to the superfund within the required timeframe (generally 90 days of selling your home). Speak to your financial adviser to find out more.
Spouse contributions
This strategy is best applied when one member of a couple significantly out-earns the other.
Spouse super contributions are contributions made into a spouse’s superannuation account by their partner. The contributing partner can claim a tax offset of up to $540 per financial year if they make contributions on behalf of their spouse, subject to certain eligibility criteria related to age, income and employment status.
Co-contributions
This one is for low income earners: the government will match a portion of after-tax contributions into your superannuation account, up to a maximum amount of $500 per financial year. To be eligible, you can only earn $54,837 per year. The government’s co-contribution amount reduces as your income increases.
Final note
In early 2023, the Australian Treasurer announced that from 1 July 2025, a 30% concessional tax rate will apply to future earnings for superannuation balances that exceed $3 million. While this isn’t yet set in stone, if you are moving close to having this amount in your superannuation account, we’re happy to have a discussion about your future strategy.
Want to grow your super for a more secure future? Reach out to Crest today.
Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.
