While it may require some effort to accumulate a substantial retirement fund, the majority of employees give this burden to their employer without making additional contributions. Employers contributed just under 70% of the total contributions to the super system in 2022–23, as indicated by APRA’s statistics and we thought we would help by giving you a guide to making superannuation contributions.
Although the compulsory Super Guarantee (SG) contributions of your employer offer a degree of financial security in retirement, if you are solely relying on them, you may not have sufficient super to live the retirement you envision.
One way to give your super account a little lift is by adding some extra contributions on your own. It can be a bit tricky to figure out the best way to go about it, but here’s a quick rundown of the main types of super contributions to help boost your super balance which can help you with in the following ways:
Help fund life insurance premiums being deducted from super.
Reduce your assessable income and tax liability
Increase your super balance in retirement
Regular contributions will assist in dollar cost averaging your investment buys
Super contributions: The two basics you need to know
1. Tax, Tax, Tax and how can you reduce it
To really get a grip on the various types of super contributions, just keep in mind that it all comes down to the tax you end up paying. So, there are basically two main types of super contributions:
You may also receive contributions into your super account from the Australian Government if you meet certain eligibility criteria.
2. There are annual caps on your contributions
The government has set yearly limits on both your concessional (before-tax) and non-concessional (after-tax) contributions into super. This is because there are tax benefits to having savings in your super account.
The caps are indexed and any contributions you make over these annual limits are subject to extra tax. The limits apply to the total of all your super accounts across different super funds.
Contribution type
General annual caps or limits (2024–25)
Concessional (before-tax) contributions
$30,000 regardless of age as well as the ability to utilize unused contributions from previous years, provided you meet certain criteria.
Non-concessional (after-tax) contributions*
$120,000 if your Total Super Balance was less than $1.9 million on the prior 30 June or $360,000 over a 3 year rolling period, meaning you can contribute this amount in one year.
Concessional (before-tax) super contributions: 5 main types
There is a 15% contributions tax payable on all concessional super contributions when they are added to your super account as these contributions come from your before-tax income or if you are classified for Division 293 purposes and your income is more than $250,000, you will pay an additional 15% on excess contributions.
1. Superannuation Guarantee (SG) contributions
SG contributions are the compulsory contributions made by your employer into your super account on your behalf as part of your total salary package. In 2024–25, the SG rate is 11.5% of your ordinary time earnings (OTE). This will rise to 12% on 1 July 2025, where it is scheduled to stay.
2. Award contributions
In some Employment Awards or Agreements, your employer may be required to make specified super contributions.
The amount of these super contributions depends on the particular Employment Award or Agreement certified by an industrial authority like the Fair Work Commission.
3. Additional employer contributions
These are contributions made by an employer above the compulsory amount required by the SG legislation or Employment Award. They are generally paid to employees of large companies as part of their salary package, or to some public sector employees.
4. Salary sacrifice
You can agree with your employer to pay some of your before-tax income directly into your super account. This is called salary sacrifice. You can set up a salary-sacrifice arrangement at any time, but it can only relate to income you have not yet earned.
By making a salary-sacrifice contribution, you are reducing your assessable taxable income and, potentially, how much tax you pay. This can be worthwhile if you pay more than 15% tax on your last dollar of income, as instead of paying your higher marginal rate of tax on your salary or wages, you only pay 15% tax on your super contribution and this can be a saving of up to 32%.
5. Personal contributions for which you claim a tax deduction
Since 1 July 2017, most people (whether self-employed or not), are able to claim a full tax deduction for personal contributions.
Tax-deductible personal contributions can be made until you reach age 74. If you are aged 67 to 74, however, you must meet the requirements of a work test to make these contributions and claim a tax deduction. This works similar to a salary sacrifice strategy with more flexibility as you can choose to make contributions whenever you want throughout the year and then claim the applicable tax deduction.
Non-concessional (after-tax) or personal voluntary contributions: 2 main types
If you wish to make a non-concessional contribution, the balance of all your super accounts at 30 June of the previous financial year must not be greater than $1.9 million.
1. Personal contributions from your take-home pay
These are contributions you choose to make from your after-tax salary or wages. You can’t claim a tax deduction for these contributions.
Personal contributions can be made regularly from your after-tax pay, or as a lump sum at any time through the year.
Your super fund can accept personal or voluntary contributions from you until you reach age 75. The benefit of this type of contribution is that the funds will form part of your tax-free component in your superfund reducing tax obligations to beneficiaries and also allow you to draw down a tax free pension stream in retirement when you are over 60.
2. Spouse contributions
If you are married or in a de facto relationship (including same-sex couples), you can make super contributions on behalf of your spouse. These contributions can be a tax-effective way to save for retirement, particularly if your spouse is only working part time or has a low income.
If you decide to contribute to your spouse’s super account, you may be eligible to receive a tax offset of up to $540 on your annual tax bill.
Annual income for receiving spouse
Your tax offset
Less than the low-income threshold of $37,000
Up to a full tax offset of $540 (actual amount is calculated as 18% of the lesser of $3,000 and your total contributions for your spouse)
Between $37,000 and the cut-off threshold of $40,000
Maximum offset amount is reduced by $0.18 for each dollar the receiving spouse’s income is over the low-income threshold
More than $40,000
Nil
Other types of super contributions: 3 main types
1. Downsizer contribution
If you are aged 55 or older and meet all the eligibility requirements, you may be able to make a downsizer contribution into your super account of up to $300,000 from the proceeds of selling your home (or up to $600,000 for couples).
The ATO doesn’t classify downsizer contributions as non-concessional contributions, so they don’t count towards your annual non-concessional contributions cap.
Under the co-contribution scheme, you receive a payment from the government when you make voluntary (after-tax) super contributions into your super account. The amount of co-contribution you receive in your super account depends on your income and the size of your personal super contribution.
In the 2024–25 financial year, if you pass several qualifying tests and earn less than $60,400, you could receive a maximum co-contribution of $500, with a minimum payment of $20.
LISTO contribution payments into your super account are designed to ensure low-income earners don’t pay more tax on their super contributions than they do on their take-home pay. These payments are made into your super account as a refund of part of the normal 15% contributions tax you paid on concessional (before-tax) contributions made into your super account.
If you earn $37,000 or less a year, you will receive a LISTO payment of 15% of your concessional contributions, up to a maximum of $500. LISTO payments are calculated and paid directly by the ATO into your super account.
We’re here to help you put together a strong financial plan if you require assistance, so you can relax knowing your future is in good hands. If you require assistance with any of the tips and information mentioned above, please contact our Oran Park or Baulkham Hills office on (02) 9188 1547 or email admin@rpwealthmangement.com.au
The information in this website and the links has been prepared for general information purposes only by our office and does not take into account your personal objectives, financial situation or needs. It is not intended to provide commercial, financial, investment, accounting, tax, personal or legal advice. You should, before you make any decision regarding any information, strategies, or products mentioned on this website, consult a professional financial advisor to consider whether it is suitable and appropriate for you and your personal needs and circumstances. RP Wealth Management is not liable for any strategies or information acted on from this article.
Ronald Pratap
Principal Financial Planner at RP Wealth Management | Financial Planning l SMSF I Insurance l Property Advisory. Our purpose is to provide our clients with sound advice and direction to assist with their financial affairs and help them make the best choices in achieving what is important to them.
