As well as super guarantee payments from your employer, there are all sorts of ways to save more into super and boost retirement savings. Find out more in our comprehensive super contributions guide.
Super Guarantee Contributions
If you work for an income, your employer is required by law to pay your superannuation guarantee (SG) contributions at least once a quarter. Whether you’re full or part-time, salaried or casual, if you receive more than $450 per month in wages or salary, you’re legally entitled to these SG payments.
Concessional Contributions
Super guarantee contributions are treated as concessional
contributions, which means they’re pre-tax contributions. When you
choose to make extra voluntary contributions into super from your
pre-tax salary, these are also treated as concessional contributions.
This can be done through a salary sacrifice arrangement with your
employer and you may benefit from tax concessions on these extra super
payments, depending on your marginal tax rate.
There is a
maximum amount of concessional contributions you can pay into super in
each financial year. This is called the concessional contributions cap
and the total amount at the time of writing is $25,000, this includes
both SG contributions from your employer and voluntary before-tax
contributions.
You can check the ATO website (www.ato.gov.au) for the latest information about the concessional contributions cap for super.
From July 2018, if you don’t contribute up to the maximum concessional
contributions cap, you can carry forward unused amounts to the next
financial year, for up to five years. This only applies if your total
superannuation balance is less than $500,000.
The ATO website provides more information on this new ‘carry-forward’ arrangement.
Non-Concessional Contributions
$25,000 may be the annual limit on concessional contributions, but
that doesn’t mean you can’t contribute more into super as an after-tax
payment. If you’re approaching retirement, it may be in your interests
to make super contributions from your net income, so you can maximise
retirement savings before you stop work. A Certified Financial Planner®
professional can help you review your goals and finances for retirement
and help you decide whether to top-up your super.
These payments
from your after-tax income are called non-concessional contributions.
If your super balance is less than $1.6 million, you can pay up to
$100,000 into your super as non-concessional contributions in the
current financial year.
Government Contributions for Low-Income Earners
If you’re on a low income, the government offers two ways to boost
your super savings if you’ve made contributions, either as SG or
voluntary payments into super.
By making non-concessional contributions, you could be entitled to an annual government co-contribution
of up to $500 directly into your super fund. Eligibility for this
payment depends on your taxable income and the amount you contribute
into super as an after-tax payment.
Visit the ATO website to
find out more about the government co-contribution scheme for low-income
earners and determine whether you’re eligible.
Tax Offset for Low-Income Earners
If you’re on a low income and make concessional contributions into
super – and this includes payments made by your employer under the SG –
you could be entitled to a tax offset at the end of the financial year.
This is called the Low Income Superannuation Tax Offset (LISTO).
Eligibility for this tax offset depends on your taxable income and the
amount you or your employer contribute into super as a before-tax
payment. If you are entitled to the LISTO, the amount will be paid into
your super fund after you lodge your tax return.
Visit the ATO website to find out more about LISTO and determine whether you’re eligible.
Spouse Contributions and Tax Offsets
Many super funds allow you to split your contributions – including
compulsory payments from your employer under the SG – with your spouse
(married or de facto). It’s important to be aware that these
contributions will still count towards your concessional and
non-concessional contributions caps.
If your spouse isn’t
working or is earning a low income, you may also be entitled to a tax
offset for these contributions into their eligible super fund.
Visit
the ATO website to find out more about the tax offset for contributions
made to super on behalf of your spouse and determine whether you’re
eligible.
Source: Money & Life February 2019