If you are 18 years or older, and are paid $450 or more per month (before tax), you are entitled to superannuation contributions of 9.5% of your income from your employer; there are a number of ways however to maximise your superannuation fund.
Concessional contributions (those for which a tax concession has been received)
You can ask your employer to pay some of your pre-tax salary into your superannuation fund instead of directly to you; by sacrificing some of your salary, your contribution will be taxed at a concessional rate of 15%, and this can be very attractive to high income earners. If your annual income was $90,000, and you chose to sacrifice $10,000 to your superannuation fund, you would save $2,400 in tax.
Salary sacrifice is not unlimited, and the cap is $30,000 rising to $35,000 for people aged 50 and over; these contribution caps include employer contribution of 9.5%.
Low income superannuation contribution (LISC)
If your annual income is less than $37,000, you may be entitled to LISC payments towards your superannuation fund. LISC is a government payment of up to $500, made by the Government to help low income earners save for their retirement. As long as your superannuation fund has your tax file number, payments will automatically be made on your behalf.Note: if your fund does not have your tax file number, it will not be allowed to accept this payment.
If you are self-employed, not employed or receive less than 10% of your income from an employer, you can make concessional contributions by claiming them as a tax deduction on your tax return.
Non-concessional contributions (those for which a tax deduction has not been claimed)
Contributions made to your superannuation fund after tax are non-concessional, as no tax deduction has been received; they are the most straightforward way of adding to your superannuation fund. Whilst you don’t receive a tax concession, having already paid tax at the full rate, these contributions are currently capped at $180,000.
Contributions are not accepted from personal injury payments, or from certain capital gains tax amounts.
If your annual income is less than $49,488 and you make after-tax contributions towards your superannuation, you are eligible for matching contributions from the government; these co-contributions are $0.50 for every $1.00 that you contribute.
Exceeding contribution threshold limits
There are penalties for exceeding your contributions caps, with concessional and non-concessional excesses treated differently.
You will be taxed on the excess contributions at your marginal tax rate, andan interest charge will be levied on the excess.
These can now be withdrawn from your superannuation fund without penalty, but any income earned will be taxed at your marginal rate
Getting the most out of your superannuation contributions
A superannuation fund is specific to each individual, and a broad brush approach to getting the most out of it is not the safest way to proceed. Independent financial advice should be taken when looking to maximise your contributions.