Making voluntary contributions to your super fund can help boost your retirement savings and potentially reduce the amount of tax you have to pay.
Considering making additional contributions to your superannuation account? You can do this by making salary sacrifice contributions or personal contributions by 30 June.
The types of voluntary contributions you can make are:
Concessional Contributions
These are contributions made before tax, which include Superannuation Guarantee Contributions (SGC), Salary Sacrifice Contributions, and Personal Deductible Contributions. The Concessional Contribution cap for the 2022-2023 financial year is $27,500.
Non-Concessional Contributions
These are contributions made after tax, which include personal contributions where you have already paid tax on the money. The Non-Concessional Contribution cap for the 2022-2023 financial year is $110,000.
Catch-up Contributions
These refer to additional contributions that can be made by individuals who haven’t previously contributed the maximum allowed amount to their super in years past. Catch-up Contributions became available on 1 July 2018 and can be made over and above the annual Concessional and Non-Concessional Contribution caps.
To be eligible for Catch-up Contributions, an individual must have a total superannuation balance of less than $500,000 at the end of the previous financial year. The unused Concessional Contribution cap can be carried forward for up to five years, allowing an individual to make larger contributions in later years.
Catch-up Contributions allow individuals to increase their superannuation balance and take advantage of tax benefits associated with superannuation, which may provide greater financial security in retirement. However, it’s important to consider the possible impact on your overall financial situation before making any significant contributions.
The Co-Contribution
This refers to the amount of money that the Australian Government contributes to the superannuation account of low and middle-income earners as an incentive to save for retirement. The Co-Contribution is a matching contribution program where the Government will match a percentage of an individual’s after-tax contribution up to a certain limit.
For the current financial year (2022-2023), the Government will make a maximum Co-Contribution payment of $500 for eligible individuals who earn $39,837 or less, and a reduced Co-Contribution payment for those who earn between $39,837 and $54,837. The Co-Contribution amount gradually reduces as the income goes up and is completely phased out for individuals who earn over $54,837.
It’s important to note that to be eligible for the Co-Contribution, the individual must have made an after-tax contribution to their super account, be under age 71 at the end of the financial year and meet the income requirements.
Spouse Contribution
This type of contribution to superannuation is a voluntary one made by one spouse to the superannuation account of their partner. It is a way to boost the retirement savings of a partner who may have taken time off from work or worked part-time to care for children or family members, and hence their super balance may be comparatively low. A spouse making the maximum contribution of $3,000 may be eligible to claim a tax offset of up to $540 per year, depending on the spouse’s income and the amount of the contribution. It is important to note that there are certain conditions that must be met in order to make a spouse contribution to super, such as the age of the receiving spouse and their work status.
Superannuation can be complex, and you should discuss any significant contributions with your financial adviser.
Katrina Dhu (GradDipFinPlan, DFS(FP), ADFS[FP]) is a representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
Any information provided to you was purely factual in nature. It has not been taken into account your personal objectives, situation or needs. The information is objectively ascertainable and is not intended to imply any recommendation or opinion about a financial product. This does not constitute financial product advice under the Corporations Act 2001 (Cth). It is recommended that you obtain financial product advice before making any decision on a financial product such as a decision to purchase or invest in a financial product. Please contact us if you would like to obtain financial product advice.