Super – Should you be making extra contributions?
Did you know you can increase your super with extra contributions?
You can grow your super by making extra payments yourself. Even small amounts add up over time, and voluntary contributions can reduce the amount of tax you pay.
If you’re on a low income, you may be eligible for extra contributions from the government.
Pre-tax super contributions: salary sacrifice
You can ask your employer to pay part of your pre-tax pay into your super account. This is known as a salary sacrifice or salary packaging.
The payments, called, “concessional contributions” are taxed at 15%. For most people, this will be lower than their marginal tax rate. You benefit because you pay less tax while you boost your retirement savings.
Generally, making extra concessional contributions is tax-effective if you earn more than $37,000 per year.
There’s a limit to how much extra you can contribute. The combined total of your employer and salary sacrificed contributions currently must not be more than $25,000 per financial year.
From 1 July 2021, the concessional contributions cap is $27,500. The increase is a result of indexation in line with average weekly ordinary time earnings (AWOTE).
Your cap may be higher if you did not use the full amount of your cap in earlier years. This is called the carry-forward of unused concessional contributions.
If you’re self-employed, concessional contributions are tax-deductible. See super for self-employed people.
Make after-tax super contributions
You can also make contributions to your super from your after-tax pay.
These payments are called “non-concessional contributions” because you have already paid tax on the money. You can make up to $100,000 in non-concessional contributions each financial year.
See non-concessional contributions on the ATO website for more information.
Need more information or clarification? Give our expert team of accountants a call to discuss your personal situation. Just one conversation may change your future.