Superannuation is the primary method of funding retirement for many Australians and is a tax effective investment vehicle to grow your money for this purpose. Planning for retirement and making contributions during your working life will enable you to take advantage of compounding investment earnings which will ultimately boost your Super balance at retirement. It is also important to ensure your Super Fund is right for you and your investment strategy (the manner in which your Super is invested) meets your financial goals and your tolerance to risk. Following are some ways to contribute to Super before the end of the financial year.
1. Make a Concessional Contribution
If you are under age 65 and below the concessional contribution limit of $25,000 for the financial year, you can make a concessional contribution into Super and claim a tax deduction.
The same benefit can be obtained via salary sacrificing (up to the above mentioned limit). This strategy does not allow you to claim a tax deduction as the tax benefit is obtained via the salary sacrifice arrangement.
When considering compliance with the contribution limit, you need to take into account all employer contributions, salary sacrifice into super and premium payments for insurance policies which are classified as concessional contributions. If you split your before-tax contributions and give some to your spouse, these contributions still count towards your concessional cap.
It is important to note that concessional contributions incur a tax of 15-30% on the way into your Super Fund.
2. Carry Forward Concessional Contributions From 2018/19 Financial Year
If you did not use your entire $25,000 contribution limit in the 2018/19 Financial Year, you may be eligible to carry forward your concessional contribution limit and make ‘catch up’ contributions in the 2019/20 Financial Year.
You are eligible to make ‘catch up’ concessional contributions from 1 July 2018, if you had a total superannuation balance of less than $500,000 on the 30 June of the previous year (balance at 30 June).
3. Make a Non-Concessional Contribution
Non-concessional contributions allow you to grow your Super but do not offer an upfront tax incentive for doing so. Equally, the contributions do not incur any contributions tax on the way into the Super Fund.
The non-concessional contribution limit is $100,000 each year. You may be able to contribute above this annual limit using a “bring forward arrangement”.
To be eligible to make non-concessional contributions you must be under age 65 or between 65 and 74 and meet the Government’s work test.
Additionally, if you have a total superannuation balance greater than or equal to the general transfer balance cap ($1.6 million from 2017–18) at the end of 30 June of the previous financial year, you may not be able to make a non-concessional contribution into your Super account.
4. Receive a Super Top-up From The Government
If your ‘total income’ (before tax) is less than $53,564 during the 2019-20 financial year and you make after-tax super contributions, you may be eligible for a matching contribution from the government, called a co-contribution. The government will match 50% of your non-concessional (after-tax) contributions up to a maximum of $500. The Tax Office will work out how much you are entitled to when you lodge your tax return. If you’re eligible, the government will pay the co-contribution directly to your fund.
To be eligible for the government co-contribution 10% or more of your ‘total income’ must come from either employment-related activities, carrying on a business or a combination of both. Other eligibility criteria apply.
5. Contribute To Your Spouse’s Super And Reduce Your Tax
If you make a contribution to a Superfund on behalf of your spouse (married or de facto) who is earning a low income or not working you may be entitled to a tax offset.
The maximum tax offset is $540 and calculated as 18% of the lesser of:
- $3,000, reduced by $1 for every $1 that the sum of your spouse’s assessable income, total reportable fringe benefits amounts and reportable employer superannuation contributions for the year was more than $37,000
- the total of your contributions for your spouse for the year.
Full eligibility criteria can be found on the ATO’s website – https://www.ato.gov.au/Individuals/Tax-return/2019/Supplementary-tax-return/Tax-offset-questions-T3-T11/T3-Superannuation-contributions-on-behalf-of-your-spouse-2019/
6. Make a Downsizer Contribution
From 1 July 2018, if you are 65 years old or older and meet the eligibility requirements, you may be able to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home.
Your downsizer contribution is not a non-concessional contribution and will not count towards your contributions caps. The downsizer contribution can still be made even if you have a total super balance above the transfer balance cap of $1.6 million.
The content on this page is general advice only as we have not taken into account your personal and financial circumstances when making this recommendation. We invite you to contact us should you have any concerns about your current investments and/or if your circumstances have changed to ensure our previous recommendations remain appropriate.