Retirement
The benefits of voluntary super contributions you aren’t thinking about
Retirement
The benefits of voluntary super contributions you aren’t thinking about
Voluntary contributions to your superannuation can go a long way.
The benefits of voluntary super contributions you aren’t thinking about
Voluntary super contributions are one of the easiest ways to boost your payout when it comes time for retirement.
Making an extra contribution of as little as $20 each week for more than 30 years can end up more than doubling what would otherwise be a $30,000 contribution through compound interest.
However, for those looking to make voluntary contributions to their superannuation, it’s important to know the difference between concessional and non-concessional contributions.
According to the ATO, non-concessional contributions encompass payments your employer makes on your behalf, from your after-tax income. Concessional contributions, on the other hand, include salary sacrificing and personal deductible contributions.
Why would you sacrifice your take-home pay?
Those with a stable or higher income may opt for a salary sacrifice voluntary contribution, which essentially sees an individual dedicate more of their pay to super, therefore reducing the sum they pocket today.
The advantage of this arrangement is that these contributions are taxed at 15 per cent rather than your usual marginal tax rate.
“The start of a new financial year is a good time to consider whether salary sacrificing into super might suit you. A financial adviser can talk you through the pros and cons of this approach,” Elinor Kasapidis, a senior manager for tax policy at CPA Australia, told nestegg.
Personal deductible contributions work similarly for the self-employed or retirees, allowing them to juice up their super contributions where desired.
Individuals are allowed up to $27,500 a year in concessional super contributions.
The limit for non-concessional super contributions is higher at $110,000 per year. This type of super contribution is taxed at your marginal tax rate.
An example of a non-concessional contribution is the spouse contributions tax offset, which allows partners to make contributions to one another’s retirement savings. Aside from the obvious long-term benefits of doing this, you can also score an 18 per cent tax offset on up to $3,000.
Alternatively, low-income earners are also eligible for a co-contribution from the government of up to $500 each year if they make less than $56,112 in some situations.
“Superannuation is a tax-advantaged environment. What this means is that you’ll generally pay less tax on income contributed to or earned within your super than outside it,” Ms Kasapidis said.
If you make regular voluntary contributions to your superannuation, you might even be eligible to reduce the amount of taxes you pay annually through deductions, so be sure to speak to an accountant to find out your options.
RELATED ARTICLES
About the author
About the author
Superannuation
Superannuation guarantee rate rises to 12 per cent as parental leave changes take effect
The superannuation guarantee rate has increased from 11.5 per cent to 12 per cent from Tuesday, with super contributions also being added to Commonwealth Parental Leave Pay for the first time. Read more
Superannuation
Rest's Sustainable Growth option achieves highest sustainability classification
Rest superannuation fund has achieved the highest sustainability classification for its Sustainable Growth investment option from the Responsible Investment Association Australasia. Read more
Superannuation
Aware Super slashes admin fees for retirees by up to 25 per cent
Aware Super has reduced administration fees for members with a retirement income account by up to 25 per cent and lowered the maximum annual fee. Read more
Superannuation
SuperAPI co-founder criticises Labor's superannuation tax as 'sneaky tax on young people'
The co-founder of SuperAPI has labelled Labor's proposed tax on superannuation balances above $3 million as a "sneaky tax on young people, tomorrow" disguised as a policy targeting wealthy retirees ...Read more
Superannuation
Election policies could reshape Australia's superannuation landscape, expert warns
Competing superannuation policies from Australia's major political parties could have significant implications for investors and retirees, according to a financial expert. Read more
Superannuation
Industry leaders weigh in on concessional super tax as Budget confirms $55bn investment
Changes to the taxation of superannuation earnings and contributions have drawn mixed responses from financial and payroll sector leaders, as the Federal Budget confirms over $55 billion in ...Read more
Superannuation
Call for indexation on super tax cap as $3m threshold draws criticism
A senior executive in the superannuation technology sector has criticised the Federal Government for failing to index the proposed $3 million superannuation tax cap, arguing the measure will unfairly ...Read more
Superannuation
Rest members back calls for fairer superannuation rules ahead of Federal Budget
Rest has called on the Federal Government to implement superannuation reforms aimed at improving fairness across the system, after member survey results showed strong support for a range of proposed ...Read more
Superannuation
Superannuation guarantee rate rises to 12 per cent as parental leave changes take effect
The superannuation guarantee rate has increased from 11.5 per cent to 12 per cent from Tuesday, with super contributions also being added to Commonwealth Parental Leave Pay for the first time. Read more
Superannuation
Rest's Sustainable Growth option achieves highest sustainability classification
Rest superannuation fund has achieved the highest sustainability classification for its Sustainable Growth investment option from the Responsible Investment Association Australasia. Read more
Superannuation
Aware Super slashes admin fees for retirees by up to 25 per cent
Aware Super has reduced administration fees for members with a retirement income account by up to 25 per cent and lowered the maximum annual fee. Read more
Superannuation
SuperAPI co-founder criticises Labor's superannuation tax as 'sneaky tax on young people'
The co-founder of SuperAPI has labelled Labor's proposed tax on superannuation balances above $3 million as a "sneaky tax on young people, tomorrow" disguised as a policy targeting wealthy retirees ...Read more
Superannuation
Election policies could reshape Australia's superannuation landscape, expert warns
Competing superannuation policies from Australia's major political parties could have significant implications for investors and retirees, according to a financial expert. Read more
Superannuation
Industry leaders weigh in on concessional super tax as Budget confirms $55bn investment
Changes to the taxation of superannuation earnings and contributions have drawn mixed responses from financial and payroll sector leaders, as the Federal Budget confirms over $55 billion in ...Read more
Superannuation
Call for indexation on super tax cap as $3m threshold draws criticism
A senior executive in the superannuation technology sector has criticised the Federal Government for failing to index the proposed $3 million superannuation tax cap, arguing the measure will unfairly ...Read more
Superannuation
Rest members back calls for fairer superannuation rules ahead of Federal Budget
Rest has called on the Federal Government to implement superannuation reforms aimed at improving fairness across the system, after member survey results showed strong support for a range of proposed ...Read more
