When you know the superannuation contribution limits and rates – and the different ways to add money to your super – you can boost your annual tax refund and save painlessly for your retirement.
A healthy Superannuation fund is an important part of planning for your retirement. Putting extra money into your superannuation is a great investment in your future. Once it becomes a habit, it is a pretty painless for most people. However, if you do it wrong, you could face costly rates that erase the tax advantage of your super contributions.
Check the superannuation contribution limits to ensure you contribute correctly because if you go over the limits, it can be costly and waste your savings.
Salary Sacrifice to Your Superannuation Fund
An easy way to contribute is through salary sacrifice. This is extra money your request to go directly from your employer into your super fund. That money is subtracted from your taxable income, reducing the tax you pay each year. There is a limit on the amount of additional money you can put into your superannuation fund each year.
How you contribute to your superannuation fund plays a part in determining the differences in tax benefits. You can choose to contribute before you receive your pay (salary sacrifice) but there is a limit on the amount. This is called the ‘concessional contributions cap.’
Concessional super contributions caps and rates
The concessional contributions cap is the amount of money you can contribute to your super account at the concessional tax rate of 15%, which is a nice low rate of tax.
From 2017, no matter your age, you can contribute up to $27,500 per year into your superannuation at the concessional rate including:
- employer contributions (including contributions made under a salary sacrifice arrangement)
- personal contributions claimed as a tax deduction.
If you pay more than $27,500 into your fund during a financial year it’s important to understand that you’ll be taxed at your marginal tax rate of 15%, PLUS pay an excess concessional contributions charge of 31.5% – a total rate of 46.5% in taxes taken out of your contribution.
Carry-forward concessional contributions
Since July 2018, you can carry forward any unused concessional contributions cap to increases your cap the following year as long as your superannuation balance is less than $500,000.
in 2021-22 Abby’s superannuation balance is $400,000 and she salary sacrifices $10,000 of her income into her superannuation fund that financial year. Of her $27,500 yearly cap she has $17,500 left. Abby is able to carry forward that $17,500 to the 2022-23 financial year giving her a cap of $27,500 + $15,000 = $42,500 for 2022-23.
It’s possible to carry forward unused cap amounts for a maximum of five years.
Non-Concessional Super Contributions Rate (after-tax contributions)
An alternative to salary sacrifice is non-concessional contributions: contributions paid into your super from your own personal pay or savings, after tax.
- These non-concessional contributions are subject to a yearly cap of $110,000.
- Be careful: Pay over the limit and the maximum marginal tax rate is levied on the excess contributions left in the super fund.
Super Co-Contributions can really help boost your Super savings
This is great opportunity for low income earners to get a much needed leg up with their super. If your total income is $41,112 or less and you pay extra into your super (after tax) the government will pay 50c for every $1 you pay you pay into your Super, up to a maximum of $500.
Co-contributions are paid for extra payments into Super up to a maximum income of $56,112. Once you earn above this amount, you can no longer receive the extra cash.
|Your Income||Payment required for maximum co-contribution||Maximum super co-contribution|
|$41,112 or less||$1,000||$500|
If you can financially afford to do so, contribute to your superannuation on a regular basis as it can have a positive long term impact. Still unsure? Talk to one of our accountants about the tax benefits of contributing.