Omari Gates
There are several ways to make personal contributions to your Australian super. You can make contributions from your after-tax pay, which is called a non-concessional contribution. You can also make contributions from your pre-tax income, which is taxed at a rate of 15% and is known as a concessional contribution. If you're a low-to-middle-income earner, you may be eligible for a co-contribution from the government, which will match up to 50 cents for every dollar you contribute, up to $1,000 per year. You can also boost your super through investment performance and any extra contributions you add during your working life. It's important to consider your financial circumstances, contribution caps, and tax issues before making personal contributions to your super.
| Characteristics | Values |
|---|---|
| How to contribute | Set up a direct debit, BPAY, or download and complete the "Add to your super with after-tax contributions" form |
| Tax benefits | You can claim a tax deduction of up to $30,000, depending on your circumstances. |
| Tax deduction eligibility | Your total super balance must be less than $2 million on 30 June of the previous financial year, and you must be under 75 for one day in the financial year. |
| Annual contribution cap | $120,000 per year in non-concessional contributions. |
| Government co-contribution eligibility | If your yearly before-tax income is less than $62,488, you could be eligible for a government co-contribution of up to $500. |
| Work test exemption | If you are under 18 or over 65, you may be exempt from the work test to claim a tax deduction for personal contributions. |
| Salary sacrifice | You can save on tax and grow your super through returns on your investments. |
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What You'll Learn
Claiming a tax deduction
If you're looking to boost your super by making personal contributions, it's important to understand how tax deductions work. Firstly, you should know that personal contributions are amounts you contribute directly to your super fund, and they can be made from your after-tax pay. These are called non-concessional contributions. If you claim a tax deduction for these contributions, they become concessional contributions, effectively coming from your pre-tax income. This means they are taxed at a rate of 15% within the fund.
To claim a tax deduction for your personal super contributions, there are a few steps you need to take. Firstly, you must notify your super fund of your intention by providing them with a notice in an approved format and receiving an acknowledgment from them. This is a crucial step to ensure your contributions are treated as concessional. Additionally, you should be aware of the applicable contribution caps. While you can make up to $120,000 in non-concessional contributions annually, claiming a tax deduction for these contributions will count towards your concessional contributions cap.
It's important to consider your financial circumstances, eligibility, and tax implications before making additional contributions. For example, if you're under 18, you must have earned income as an employee or business operator during the year to claim a deduction. Additionally, from 1 July 2022, you must meet the work test (or exemption) to claim a tax deduction for personal contributions as concessional contributions. This requirement applies if you are 75 years old or older as well.
If you're a low-to-middle-income earner, you may be eligible for a co-contribution from the government. This means the government will match a portion of your after-tax super contributions, providing a beneficial boost to your retirement savings. However, if you claim a tax deduction for your after-tax contributions, they will no longer be eligible for the government co-contribution. Therefore, it's essential to carefully consider your options and seek financial advice if needed.
Lastly, there are a few other considerations when making personal contributions and claiming tax deductions. You can set up regular direct debits or one-off payments through your online account or by completing and returning the appropriate form. Additionally, if you contribute to your spouse's super account, you may be eligible for a tax offset, providing further tax benefits.
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Salary sacrifice
To set up a salary sacrifice arrangement, you must notify your employer and agree on the amount to be contributed to your super fund. It is important to note that salary sacrifice only applies to future salary and not past earnings. For example, you can only salary sacrifice a pay bonus if you entered into an agreement before receiving it.
It is recommended to seek financial advice before deciding if a salary sacrifice arrangement is suitable for you, as it may impact government and employee benefits. Additionally, consider your debt levels and ensure you do not exceed your contribution caps, as this will result in extra tax.
By utilising salary sacrifice, you can effectively boost your super savings and potentially minimise your income tax liability.
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After-tax contributions
If you want to make after-tax contributions to your Australian super, there are a few things you should know. Firstly, these contributions are also called non-concessional contributions because you have already paid tax on the money. Your total super balance must be less than $2 million on 30 June of the previous financial year, and you need to be under the age of 75 for at least one day in the financial year.
You can make after-tax contributions to your super from your take-home pay, which can boost your super in addition to your employer's contributions. You can set up a direct debit or make a one-off payment through your online account or the Aware Super app. You can also contribute through BPAY, either as a one-off payment or a regular direct debit.
There are contribution caps to be aware of. You can contribute up to $120,000 each year in non-concessional contributions. However, a special rule allows you to bring forward up to three years' worth of contributions, meaning you can contribute up to $360,000 in one financial year.
If you earn less than $62,488 before tax, you may be eligible for a government co-contribution. The government will match up to 50 cents for every dollar you contribute, up to $1,000 per year. This is paid directly into your super account after you lodge your tax return for that year.
You may also be able to claim your after-tax contributions as a tax deduction, depending on your circumstances. If you claim a tax deduction, your contributions will be classed as concessional contributions and will no longer be eligible for the government co-contribution.
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Contribution caps
There are caps on the amount of money you can contribute to your super each year without incurring extra tax. These caps apply to both before-tax (concessional) and after-tax (non-concessional) contributions.
From 1 July 2024, the concessional contributions cap will be $30,000. This cap was $27,500 from 1 July 2021 to 30 June 2024 and $25,000 from 1 July 2017 to 30 June 2021. If you exceed your cap, you will have to pay extra tax, and any excess concessional contributions you leave in your super will count towards your non-concessional contributions cap. The non-concessional cap for an income year is a multiple of the concessional contributions cap. From 1 July 2017, your non-concessional cap for a financial year is nil if your total superannuation balance at the end of the previous financial year is greater than or equal to the general transfer balance cap. The general transfer balance cap was $1.7 million between 1 July 2021 and 30 June 2023 and will be $2 million from 1 July 2025.
If you have unused cap amounts from previous years, you may be able to carry them forward to increase your contribution caps in later years. From 1 July 2018, if your total superannuation balance is less than $500,000 on 30 June of the previous financial year, you may be entitled to contribute more than the general concessional contributions cap and make additional concessional contributions for any unused amounts. Unused amounts are available for a maximum of five years.
If you are under 75 and you go over the cap, you may be able to bring forward up to three years of after-tax contributions. You can generally contribute up to $120,000 in after-tax contributions each financial year (2024-25) without having to pay extra tax. Any contributions you make over this limit will be taxed at 47% (2024-25).
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Government co-contribution
The Australian government has a co-contribution scheme to help low and middle-income earners boost their retirement savings. If you are eligible and make personal non-concessional (after-tax) contributions to your super fund, the government will also make a co-contribution of up to $500. The co-contribution amount depends on your income and how much you contribute.
To be eligible for the super co-contribution scheme, you must:
- Earn less than $62,488 before tax in the 2025-26 financial year.
- Earn at least 10% of your income from employment or self-employment.
- Have a total superannuation balance of less than $1.7 million at the start of the financial year.
You don't need to apply for the super co-contribution. The Australian Taxation Office (ATO) will decide how much you're eligible to receive when you lodge your tax return. If you are eligible and your fund has your tax file number (TFN), the ATO will pay the co-contribution to your super account automatically.
If you have more than one super account, you must tell the ATO your chosen fund for co-contributions. You can do this through myGov. It is important to nominate the fund before you lodge your tax return to ensure the super co-contribution is paid to the fund of your choice.
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Frequently asked questions
You can contribute up to $120,000 each year in non-concessional contributions.
If you claim a tax deduction for your contributions, they are classed as concessional and are taxed at 15% in the fund. Non-concessional contributions are made from money that has already been taxed.
If you are under 18 years old, you can only claim a deduction for your personal super contributions if you earned income as an employee or business operator during the year. If you are 75 or older, you can only claim a deduction for contributions made before the 28th day of the month following the month in which you turned 75.
You can set up a direct debit for one-off or regular contributions through your online account or by completing and returning a form. You can also set up one-off or regular payments via BPAY from your bank account.
Yes, contributing to your super can help boost your retirement savings and reduce your tax. If you earn below a certain threshold, you may also be eligible for a government co-contribution.
