Add to your superannuation before June 30 to build your balance

Chipping in a little more to your super can be a great way to bump up your retirement nest-egg.

As an employee, your employer should be contributing 10.5% of your pay towards your superannuation. For those who are self-employed, you’re likely voluntarily adding to your super or receiving contributions from your business. In both cases, it’s a good idea to consider supplementing your super contributions.

Why should you add more to your super?

Making additional contributions is beneficial for two main reasons. It allows for potential tax savings since super contributions are taxed at a lower rate (15% compared to your personal tax rate). And, by investing more and earlier, it means you’ll see greater returns over time and enjoy a higher retirement fund.

For most people, it’s easier and more manageable to consistently contribute small amounts over time, than finding a spare lump sum. The only downside of contributing extra is that you’re locking this money away until you’re eligible to access it upon retirement. However, this can be a great savings strategy without the temptation and means to spend it sooner.

How can you add to your super?

There are two ways you can add to your super: concessional and non-concessional contributions.

Concessional contributions (before-tax):

Concessional contributions are contributions made to your super account before tax. They serve the dual purpose of increasing your super balance and decreasing your personal tax income. Concessional contributions incur a contributions tax of 15% upon being received by your super fund.

Concessional contributions include:

• Employer contributions:
• Compulsory employer contributions
• Salary sacrifice payments
• Additional concessional contributions
• Superannuation Guarantee (SG)

• Personal contributions (as an income tax deduction)

Per the ATO, the general concessional contributions cap is $27,500 for the 2022-23 financial year. You can also look at contributing your unused superannuation contribution amounts from prior years (check to see if you qualify).

Non-concessional contributions (after-tax):

Non-concessional contributions are after-tax contributions made from your bank account or savings. They increase your super balance without reducing your personal income tax. However, if you’re eligible, these contributions can enable you to benefit from the government co-contribution or spouse contribution tax offset. Non-concessional contributions do not incur a contributions tax.

The main non-concessional contributions include:

· Personal contributions (not claimed as a tax deduction)

· Spouse contributions into your super account

· Employer contributions (from your after-tax income)

Per the ATO, the general non-concessional contributions cap is $110,000 for the 2022-23 financial year. You may also have the option to use the 3-year bring forward rule to contribute $330,000 (check to see if you qualify).

Government co-contribution

You might be entitled to a bonus government co-contribution if you earn under a certain amount and make non-concessional contributions.

If your annual income is below $42,016 (for financial year 2022-23), you may be entitled to a co-contribution of up to $500 per year. The amount depends on your income and how much you contribute. This is tax-free and doesn’t incur taxes upon deposit or withdrawal from your account.

You don’t need to apply for the government co-contribution. It will be automatically paid into your super after you lodge your tax return.

Don’t wait to plan your future.

If you’re looking for assistance contributing money into superannuation, then Ascent Accountants can help. We know it’s easy to forget about super or put off thinking about it for another time, but that’s where we come in. We can help implement a personalised super strategy so you’ll enjoy more come retirement. Get in touch with our friendly team to schedule an appointment