When it comes to ensuring a comfortable retirement, your employer compulsory Superannuation Guarantee (SG) contributions may not be enough. So with the end of financial year fast approaching, now could be a good time to review the contributions that go into your super account and consider whether you might benefit from adding a little more yourself. It may make a big difference by the time you retire.
Here’s two ways to make additional contributions
When it comes to adding to your super yourself, you can make contributions from your before-tax income and after-tax income. Here’s a snapshot of how each option works.
Before tax: salary sacrifice contributions
Contributing to your super from your before-tax salary is often called salary sacrifice.
Salary sacrifice is an arrangement you make with your employer, where you ask them to pay part of your salary or wages directly into your super fund instead of to you.
If your employer makes super contributions through a salary sacrifice agreement with you, those contributions are taxed in the super fund at a maximum rate of 15%. For many people, this tax rate is lower than the marginal tax rate they’d pay if they took it home as pay.
Both salary sacrifice and SG contributions are called concessional contributions. It’s important to know annual limits apply to concessional contributions.
Are your SG contributions going to your preferred fund?
If your employer is currently not paying their compulsory SG contributions into the super fund of your choice and you would like them to, simply complete the Super Choice form available from the ATO and submit it to your employer.
After tax: personal contributions
You can also make extra deposits to your super with money you’ve already paid tax on. Contributions to your super from your after-tax salary are called personal contributions.
You can set up regular contributions or you can make a one-off contribution when you have some spare funds…like when you receive a bonus or tax refund, for example!
If you choose to make personal contributions into your super account, speak to your fund about the most convenient way to do it: direct debit, BPAY or cheque options may be available.
After-tax contributions are also non-concessional contributions, unless you claim a tax deduction for them. There are limits to the non-concessional contributions you can make and you may need to satisfy a work test.
How to get tax deductions for personal contributions
To claim these contributions as a tax deduction, you need to give your super fund a Notice of intent to claim or vary a deduction for personal contributions or equivalent form. You need to do this before you complete your tax return or before 30 June of the financial year following the year you made the contributions (whichever occurs earlier). If you’re planning to close your account, start a TTR or pension account, or split contributions with your spouse, make sure your fund has acknowledged and accepted your Notice of Intent before you make these changes.
Your super fund will treat them as before-tax (concessional) contributions. Similar to salary sacrifice contributions, they will be subject to 15% contributions tax. This strategy may be useful if you’re self-employed or your employer doesn’t allow you to salary sacrifice.
Your super fund needs to accept and acknowledge your intention before you can claim your tax deduction. Please note that eligibility and time restrictions apply which may limit when you can submit a notice of intent.
Re-contributing after COVID-19 early release
If you’ve withdrawn money from your super under the COVID-19 early release arrangement and want to re-contribute some or all of it, you should read the ATO’s information about re-contributions.
Where to find out more
For more details about making extra contributions, check out the ATO links below. If you’re unsure about the different super contribution options and whether they’re right for you, we also recommended speaking to a licensed financial planner.
- Salary sacrifice: https://www.ato.gov.au/individuals/super/growing-your-super/adding-to-your-super/salary-sacrificing-super/
- Personal contributions: https://www.ato.gov.au/Individuals/Super/Growing-your-super/Adding-to-your-super/Personal-super-contributions/
- Contributions limits: https://www.ato.gov.au/Individuals/Super/In-detail/Growing-your-super/Super-contributions—too-much-can-mean-extra-tax/
- Financial planners: https://fpa.com.au/find-a-planner/
Any questions about ING Living Super and how to contribute, visit ing.com.au/contactus for the best ways and times to connect.
The information is current as at publication. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. ING Living Super (which is part of the ING Superannuation Fund ABN 13 355 603 448) is issued by Diversa Trustees Limited ABN 49 006 421 638, AFSL 235153 RSE L0000635.
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