As we progress through life, the amount we pay into superannuation tends to take on a greater importance. In our early working lives, our employers pay the standard 9.5% contribution into our super fund but (rightly or wrongly), few people proactively consider their superannuation or the retirement which it will have to fund.
As we get older, our incomes typically increase, giving rise to more disposable income, particularly as the kids fly the nest. Retirement itself – once a destination which was barely on the map – now appears alarmingly close and for many, that leads to a greater focus on boosting our superannuation.
There are many ways to contribute to super, some more tax effective than others. Here’s our guide to building up your super and getting the best tax outcome in the process.
SUPER CONCESSIONAL CONTRIBUTION CAPS
There is a limit on how much you can put into super each year from your pre-tax income. Such contributions are called concessional contributions.
From 1 July 2017, you can contribute up to $25,000 into your super fund. This includes your employer's 9.5% super guarantee contribution, any salary sacrificed amounts and tax deductible personal contributions (see below for more details on salary sacrificing super and making tax deductible contributions). This is called the concessional contributions cap.
From 1 July 2018, you can carry forward the unused part of your $25,000 annual concessional contributions cap for up to five years (using up the earliest year first) provided your superannuation balance is less than $500,000. This means that the 2019/20 financial year (ie, the year beginning 1 July 2019) is the first year that unused concessional contribution amounts can be used.
If you are aged between 65 and 74, you can only make concessional contributions if you pass the “work test”. That means that you have to work 40 hours or more in a consecutive 30 day period in the financial year in order to make contributions.
TIP: The work test is quite easy to pass. If you work 40 hours during a consecutive 30 day period, you could – if you wanted – not work at all during the rest of the year.