Have you thought about boosting your super savings?

For many people, super is the most tax-effective vehicle to invest savings. This is because concessional rates of tax apply to super contributions and investment earnings. 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. As well as changes from the  Federal Budget applying from 1 July 2021.

*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 15% contributions tax instead of your marginal income tax rate.

Please be aware that:

  • There is currently a cap of $25,000 pa for Concessional Contributions. This cap will increase to $27,500 from 1 July 2021.

  • Your cap may be higher if you did not use your full cap in prior years: Carry Forward Rule.

  • The cap takes into account the following contributions:

    • Superannuation Guarantee: contributions made by your employer on your behalf at 9.5% 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 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 $100,000 pa for non-concessional contributions. This cap will increase to $110,000 from 1 July 2021.

  • If you are under 65 (reduced to 60 under proposed changes in the federal budget), you can Bring Forward up to two years of non-concessional contributions limits. Hence, you may be able to contribute up to $300,000 in a single year.

Did you know?

There are special contributions types, in addition to the above limits, which may apply to:

  • People over 65 (or 60 from 1 July) selling their home.

  • Small business owners selling an active business asset as part of their retirement planning.

  • Owners of certain UK based pension funds.

If you would like further information on these special contributions or one of our experts to develop a super contribution & investment strategy tailored to your goals and risk appetite, please contact us.

Campbell Korff.

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