A tax-effective way to grow your savings for your retirement can be by making your own personal contributions to your superannuation. When it comes to your super it’s important to make the most of it during your working years, so you can provide yourself with the best possible financial situation for your golden years. 

However, just like anything tax and money-related, these things can get pretty complicated, causing you to get lost in all the jargon and complicated strategies. You may not be aware of the contribution limits and restrictions in superannuation, and if that’s the case, it’s beneficial to get yourself familiar with it.

By planning ahead for retirement, you can ensure you are making the right decisions about your super that will benefit you most in the long term. 

Speaking with a financial adviser can provide you with the right guidance, especially when planning for your retirement. 

In this article, our team of experts created a guide that will help you navigate through the different types of super contributions. Here’s what you need to know about the 4 different types of super contributions you can make:

The Different Types of Super Contributions

Type #1: Concessional Contributions:

Concessional contributions are contributions made from your pre-tax income to your super. This type of contribution is taxed at 15%, which is typically lower than your marginal tax rate. This generally allows you to pay less tax while boosting your retirement savings. 

How can I make a concessional contribution?

You can ask your employer to pay part of your pre-tax pay into your super fund, which is known as a salary sacrifice method. This simply means, your employer will be paying more than the super guarantee, which is currently 10% of your gross salary, in exchange for you receiving less take-home pay – but also benefiting from paying less tax.

What is the limit to making concessional contributions?

You can currently contribute up to $27,500 per financial year through your combined employer and salary sacrificed contributions. 

It may be beneficial, as you start to contribute to your retirement, to speak with your financial adviser to see which type works best for you and how you can maximise your contribution opportunities for your personal circumstances. 

Type #2: Non-Concessional Contributions

A non-concessional contribution is a type of contribution that you can make to your super from your after-tax pay. These types of payments aren’t taxed when they are received by your super fund as you have already paid income tax on this money. 

How can I make a non-concessional contribution?

It can be effective if you have spare money to contribute to your super, where it will be invested on your behalf through your super fund. You can easily make non-concessional contributions directly to your super through your super fund or by going through a financial adviser.

What is the limit to making non-concessional contributions?

You can currently make up to $110,000 of non-concessional contributions to your super each financial year. It’s important, however, that you do not exceed this cap within the financial year or you will have to pay an additional tax/fee.

You can learn more about making a non-concessional contribution through the ATO or by asking your financial adviser. 

If you would like to make voluntary contributions, it can be useful to contact a financial adviser to achieve the most effective financial outcome for you. 

Type #3: Spouse Contributions

Another effective way to reduce your tax can be by making non-concessional contributions to your spouse’s super fund. You can benefit by:

• Helping your other half build their retirement savings
• And you also may be eligible for a tax offset. 

Am I eligible for the spouse contributions tax offset?

If you want to take advantage of the tax offset when making a spouse contribution, you should check to see if you meet the eligibility criteria:

• You must make a non-concessional contribution to your spouse’s super.
• You must be married or in a de facto relationship
• You must both be Australian residents 
• The receiving spouse must be under 67 or meet the work test requirements

Spouse contributions can create additional opportunities for both you and your other half.   Besides that, doing so also maximises the level of retirement savings that you and your spouse have to share.

Type #4: Downsizer Contribution

As part of the 2021-22 Federal Budget, from 1 July 2022 eligible individuals aged 60 years or older can make a downsizer contribution (currently, the required age to make a downsizer contribution is 65 and above) 

This type of contribution can significantly boost your retirement savings, as it allows you to make a tax-free contribution to your super of up to $300,000 using the proceeds from the sale of your home. 

Often individuals nearing retirement may choose to downsize their home to make it easier for them to maintain during their retirement. This contribution strategy is a great way to do that and still enjoy financial security. 

Am I eligible for the downsizer contribution scheme?

To make a downsizer super contribution, you must:

• Be aged over 65 (changing to over the age of 60 from 1 July 2022)
• Have owned your Australian home for a minimum of 10 years
• Have not previously made a downsizer contribution
• Provide your super fund with a ‘Downsizer contributions into super form’

Seek a Financial Adviser to Help You Make the Most of Your Superannuation

Retirement planning experts can help you grow your super and ensure you are on track to achieving your retirement goals. They can help you choose the right options to boost your savings, while tailored to your personal circumstances. To improve your superannuation balance, it’s important to start early!

How Can We Help You?

If you’re planning for your retirement and need help managing your super contributions, work with Hyland Financial Planning’s expert financial advisers in Hornsby. 

Hyland Financial Planning aims to build a collaborative partnership with clients to help them improve their wealth through strategic planning and creation. With our help, we’ll guide you through navigating your finances to help you reach financial freedom.

Book a complimentary 15-minute chat with one of our experts today to find out how we can help you achieve your financial goals!