Superannuation: your contributions explained

Our simple guide explains the different super contributions you can make.

Mature couple working out their super contributions

As a long-term savings strategy, there are many ways you can contribute to your superannuation fund throughout your lifetime. And while this makes it incredibly flexible, it can be a little confusing. So, if you’re wondering what superannuation contributions you can make, our simple guide will help.

Concessional contributions
These are contributions that are made pre-tax and there is a limit to how much can be contributed. Currently, the limit if you were over 49 years of age on 30 June 2016 is $35,000.

Employer contributions
Generally, as long as you earn more than $450 in a month, your employer must make employer contributions under the Superannuation Guarantee Act. Currently the rate that must be paid is 9.5 per cent of your ordinary time earnings into a superannuation fund of your choice or your employer’s default fund.

Salary sacrifice
Some employers allow you the option to boost your superannuation balance by entering into a salary sacrifice arrangement. Under such an agreement, your employer makes pre-tax contributions to your nominated fund on your behalf. This has the effect of lowering your assessable income, which may drop you into a lower tax bracket. It does mean a reduction in the money you take home, but the benefit is that you may pay less tax as these contributions are taxed at 15 per cent when they go into your super, rather than being taxed at your marginal tax rate. It’s not for everyone – talk to your HR or Payroll departments to find out if they offer salary sacrifice, and if you’re considered a low income earner, you may be better off receiving the money as income instead of deferring it until retirement. 

Non-concessional contributions
These are contributions to your super that are made after tax and also have limits as to how much can be contributed

Personal contributions 
You can make after-tax contributions of $180,000 per annum to your superannuation fund. If you exceed this cap in a financial year, and you’re under 65, you will trigger the ‘bring forward rule’ which is a three year period in which you can make up to $540,000 of non-concessional contributions. For instance, if you made a contribution of $250,000 in a financial year then you could make an additional $290,000 over the next two years. This can be particularly useful if you have received an inheritance or sold an asset such as property.

If you are over 65 you can keep making non-concessional contributions until you’re 75, as long as you pass the work test.

Spouse contributions
If your spouse does not work or is a low-income earner, you can make contributions on their behalf. Although these contributions are made post-tax, you may be able to claim a tax offset depending on your spouse’s income.

Superannuation co-contributions
If you earn less than $51,021 and you choose to make non-concessional contributions to your superannuation, the Government may add to these contributions. This is a great way to give your superannuation balance a boost if you can afford to do so.

Using a combination of these contributions can help you maximise your superannuation balance but you should seek professional financial advice on how best to manage your retirement savings.

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This article has been sponsored by AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, the Trustee of AustralianSuper ABN 65 714 394 898. The views expressed are those of YourLifeChoices and not necessarily the views of AustralianSuper. The article contains general information and you should consider if it is right for you.

Salary sacrifice contributions are concessional contributions and, along with any contributions by your employer, are subject to concessional contribution caps. Talk to your payroll manager to see whether your employer allows salary sacrifice into super.


    To make a comment, please register or login
    27th Apr 2016
    Sorry, but your explanation of salary sacrifice is somewhat misleading. The only role the employer has in this is to allow the pay office to make payments out of your salary, pre-tax, to your nominated super company. You initiate this, not the employer. It is important to note that these payments come out of your salary - they are not extra payments made by the employer.
    What are the limits for personal contributions if you are over 65, and what is the work test??????
    27th Apr 2016
    Contribution limits are the same as when you are 65 and yor can contribute up to the age of 74 or in fact under 75.
    You must pass the work test after you are 65, which is Gainfully employed for at least 40 hours in a 30 consecutive day period.

    Note: Regardless of your age, your employer must make Superannuation Guarantee contributions for as long as you continue working and remain eligible for SG contributions (for example, earn a minimum of $450 a month). The payment of SG used to be only required for those aged under 70, but the requirement was broadened to any age from 1 July 2013.
    27th Apr 2016
    The rate for employer contributions were supposed to go up to 12% with talk of 15%. FUnny how that never occurred.
    Question: are after tax contributions paying a 15% tax rate? If so then superannuation is STILL a tax effective way of running a profitable business as this avoids the 49% tax rate which successful businesses making a lot of money should be paying (30% company tax rate...and then 49% when taken as a payment by director/s). Correct?
    27th Apr 2016
    Mick, there is no Tax on non concessional contributions (After Tax)
    Only concessional contributions attract the 15% tax which rises to 30% for anyone earning over $180K
    27th Apr 2016
    So income earned by the fund on these contributions are tax free? Really?
    28th Apr 2016
    You asked about Contributions not Earnings.
    Earnings are taxed at 15%.
    28th Apr 2016
    Yes. I needed to be more concise.
    27th Apr 2016
    Wondering what happens if an employer doesnt pay super for say, 5 years, then puts the business or businesses into liquidation, telling the employees they will get nothing. One person is owed in excess of 60,000 in holiday pay, and everything else including back wages. Somehow I thought that the govt. covered the super side of things.
    27th Apr 2016
    This is why super payments need to be made into a fund which is at arm's length from the employer. Have heard stories about people's super when business go under.
    Life experience
    27th Apr 2016
    A question I have is - does the employer pay 9.5 on the full amount of pay if you salary sacrifice , or the amount you get after salary sacrificing into super.
    I think I read somewhere they like is to salary sacrifice as it saves them money ??

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