While you might not be flush with cash now and able to put large amounts into superannuation, it’s important that you are aware of what is possible to maximise your super balance and possibly reduce your tax at the same time.

 

  • DEDUCTIBLE SUPER CAP OF $27,500 FOR EVERYONE
  • CARRIED FORWARD CONTRIBUTIONS
  • SPOUSE SUPER CONTRIBUTIONS
  • GOVERNMENT CO-CONTRIBUTION TO YOUR SUPER

 

DEDUCTIBLE SUPER CAP OF $27,500 FOR EVERYONE

The tax-deductible super contribution limit (or “cap”) is $27,500 for all individuals under age 75. Individuals need to pass a work test if over age 67.

To save tax, consider making the maximum tax-deductible super contribution this year before 30 June 2022. The advantage of this strategy is that superannuation contributions are taxed at between 15% to 30% compared to typical personal income tax rates of between 34.5% and 47%.

CARRIED FORWARD CONTRIBUTIONS

Carry-forward contributions are not a new type of contribution, they are simply new rules that allow super fund members to use any of their unused concessional contributions cap on a rolling basis for five years.

This means if you don’t use the full amount of your concessional contribution cap ($25,000 in 2019, 2020 and 2021), you may qualify to carry-forward the unused amount and take advantage of it up to five years later.

Carry-forward contributions are calculated on a rolling basis over five years, but any amount not used after five years expires. These carry-forward rules only relate to concessional contributions into super, not non-concessional contributions, as they have different caps.

In order to be able to use your unused cap amounts, your total super balance at the end of the previous financial year needs to be less than $500,000.

SPOUSE SUPER CONTRIBUTIONS

You can make super contributions on behalf of your spouse (married or de facto), provided you meet eligibility criteria, and your super fund allows it. This is known as contribution splitting. 

Doing this not only helps to boost your spouse’s retirement savings, but it can also help you save tax if your spouse has limited income.

You may be eligible for a tax offset of up to $540 on super contributions of up to $3,000 that you make on behalf of your spouse if your spouse’s income is $37,000 p.a. or less.

The offset gradually reduces for income above $37,000 p.a. and completely phases out at $40,000 p.a. and above. 

GOVERNMENT CO-CONTRIBUTION TO YOUR SUPER

If you are on a lower income and earn at least 10% of your income from employment or carrying on a business and make a “non-concessional contribution” to super, you may be eligible for a Government co-contribution of up to $500.

In 2022, the maximum co-contribution is available if you contribute $1,000 and earn $41,112 or less. A lower amount may be received if you contribute less than $1,000 and/or earn between $41,112 and $56,112.