For many people, super is the most tax-effective vehicle to invest savings for retirement. This is because concessional rates of tax apply to super contributions and investment earnings, often much lower than your own marginal tax rate if you are working. Also, and perhaps most importantly, when converted to pension mode in retirement your investment earnings become tax-free*.
Below, we have outlined the common contribution types and their annual limits. We have also included an overview of the key changes to superannuation from the Federal Budget applying from 1 July 2022.
*Limits and regulations apply. Please contact us for more information.
Concessional Contributions
Concessional Contributions are made to your super fund from pre-tax income.
As a result, you will be charged a 15% contributions tax instead of your marginal income tax rate.
Please be aware that:
- The general concessional contributions cap is $27,500 for a financial year.
- Your cap may be higher if you did not use your full cap in previous financial years: Carry forward unused concessional contributions
- The concessional contribution cap takes into account the following contributions:
- Superannuation Guarantee: contributions made by your employer on your behalf at 10% of your pre-tax wage.
- Salary Sacrifice: an agreement with your employer to sacrifice an additional portion of your pre-tax income to contribute to your super.
- Personal Contributions: contributions from your personal after-tax funds are claimed as a tax deduction.
- If you wish to nominate part or all of your Personal Contributions as a Concessional Contribution for the 2020/21 tax year, a Notice of Intent to Claim or Vary a Deduction for Personal Super Contributions form will need to be completed and submitted to your super fund before the earlier of the day you lodge your tax return or the end of the following tax year.
Non-Concessional Contributions
Non-Concessional Contributions are made from your after-tax funds directly to your superannuation fund. If no tax deduction is claimed, no contributions tax is charged.
Secondly, non-concessional contributions form part of the tax-free component of your super and will be tax-free upon withdrawal.
Please be aware that:
- There is currently a cap of $110,000 pa for non-concessional contributions.
- Your cap may be higher if you did not use your full non-concessional cap in previous financial years and are under 67 years of age: Bring forward arrangements.
Did you know?
There are special contribution types and/or tax advantages that may apply to:
- People over 60 are selling their homes.
- Partners making contributions on behalf of their spouse
- Low to middle-income earners who may be eligible for a Government co-contribution
- Small business owners sell an active business asset as part of their retirement planning.
- Owners of certain UK-based pension funds.
The recent changes impacting superannuation that were proposed in the Federal Budget applying from 1 July 2022 will be as follows:
- The $450 Super Guarantee (SG) threshold will be removed, meaning that employers will start paying super for low-income earners.
- The SG contribution rate will rise to 10.5% p.a. for all employees.
- People aged 65-74 will no longer have to meet the work test to make voluntary contributions to super.
- The ‘bring-forward’ rule age limit will increase to 75, so more people can make lump sum contributions to super.
- The minimum age for downsizer contributions will reduce from 65 to 60, giving more flexibility to people selling their homes.
- First home buyers can now save up to $50,000, and any deemed earnings, to use as a home deposit through the First Home Buyer Saver Scheme.
Please contact us if you would like further information on any of the contributions detailed above or for one of our experts to develop a super and investment strategy tailored to your goals and risk appetite.
Campbell Korff
General Advice Disclaimer
The information on this website is of a general nature only. The contents herein do not consider the investment objectives, financial situation, or particular needs of any person. They should not be used as the basis for making any financial or other decisions. You should consult your Financial Planning adviser or other professional advisers prior to acting on this information. Korff Wealth Pty Ltd, its employees, agents, third-party providers, merchants, licensors, or the like may have investments in any of the products discussed on this website or earn commissions if InterPrac clients invest or utilise any services featured. This disclaimer is intended to exclude any liability for loss as a result of acting on the information or opinions expressed.