Supercharged savings: Understanding your super contribution options (as of 24-25 FY)
*As of the 2024-2025 financial year, these figures are accurate at the time of publication based on the most recent data available.
If you're looking to boost your super beyond the standard employer contributions, you've come to the right place. Whether you're flying solo or navigating the financial seas with a partner, making smart contributions to your super can really set you up for a comfortable retirement. Let’s dive into why pumping up your super matters and how to do it.
Why boost your super?
More money for retirement: It’s simple: more money going into your super now means more to spend when you’re no longer punching the clock.
Cover insurance premiums: Using your super to cover life insurance premiums shifts the cost away from your day-to-day bank account. It means you're keeping that extra bit of cash for life's other expenses while making sure you're still covered.
Tax perks: Contributing through salary sacrifice or personal deductible contributions can reduce your taxable income, giving you both a bigger nest egg and lower personal tax bills.
Types of contributions to consider
Salary sacrifice: This is when you agree with your employer to pay a chunk of your pre-tax salary directly into your super. By doing this, you reduce your taxable income and get a double whammy—boosting your retirement savings while paying less tax now. Just keep in mind the concessional contributions cap has increased for the 2024-25 financial year. Now, you can contribute up to $30,000 per year. This includes your employer’s contributions and any salary sacrifices.
Personal deductible contributions: Whether you're self-employed or an employee, personal deductible contributions allow you to contribute to your super from after-tax income and claim a tax deduction. Again, the concessional cap of $30,000 applies, but here’s the kicker: if you haven’t used up your cap in previous years and have a total super balance below $500,000, you can make "catch-up" contributions. This means you could potentially contribute more and still get a tax deduction.
Personal non-deductible contributions: These are contributions you make with after-tax money without claiming a deduction. While there’s no immediate tax benefit, they aren’t subject to the 15% tax on concessional contributions. The cap for non-concessional contributions has also increased to $120,000 per year, or up to $360,000 over three years using the bring-forward rule. However, this only applies if your super balance is below $1.9 million.
Spouse contributions: Want to give your partner’s super a boost while scoring a tax offset for yourself? If your spouse is earning less than $37,000 a year, you could contribute up to $3,000 into their super and get a tax offset of up to $540. The offset gradually reduces and phases out at $40,000.
The pros and cons
Salary sacrifice: The upside is lower taxable income and automatic savings. The downside? A smaller take-home pay, which might pinch your current budget.
Personal deductible contributions: Flexibility is the name of the game—you decide how much and when to contribute. The only catch is staying within the cap to avoid extra taxes. And don’t forget to submit a valid ATO Notice of Intent to Claim after making personal contributions. Read more here.
Personal non-deductible contributions: The advantage here is growing your super without affecting your tax situation right now. The downside? No immediate tax relief like concessional contributions.
Spouse contributions: A win-win! You boost your spouse’s retirement fund and grab a tax offset. Just keep an eye on the income caps to make sure you’re eligible for the offset.
Getting it right
Before you start making extra contributions, make sure you’re up to speed on the latest contribution limits and rules. As we’ve seen, these can change year by year. It’s always a good idea to chat with your financial adviser to tailor your super contribution strategy based on your goals—whether you’re a high-flyer or on a tight budget. Because let’s face it, the right moves today will make those retirement days a lot sunnier.
For more details, check out the Australian Taxation Office (ATO) website for the latest on contribution caps and other super-related info
Sources:
Australian Taxation Office - Contribution Caps
Grant Thornton Australia - Superannuation changes from July 2024