super contributions

Have you thought about super contributions?

When looking at investments, superannuation is widely considered to be one of the most tax-effective for accumulating wealth and funding long term financial needs.

Your regular superannuation guarantee is a key foundation for accumulating wealth, however, is sometimes not enough to fund retirement depending on an individual’s vision for the future and retirement lifestyle. 

We encourage you to consider whether personal deductible contributions or salary sacrificing may suit your financial plan.

Personal deductible contributions

Personal deductible contributions allow you to reduce your taxable income. The amount of the contribution claimed as a tax deduction is generally taxed at 15% rather than your marginal tax rate.

Personal deductible contributions can be a powerful force in growing your wealth. Contributing to your superannuation now will allow your retirement savings to grow at a faster rate, benefiting you in the long run and you’ll pay less tax!

You have the flexibility to decide on the amount to claim as a deduction at the end of the financial year. You may also be able to claim a tax deduction to reduce your tax liability. According to the most recent ATO data*, for the 2018-19 financial year, 436,952 individuals claimed on average $13,395 in deductions for personal super contributions—the median being $12,500.

For the 2021-2022 financial year, the maximum concessional contributions limit is $27,500. Although, a carry-forward provision allows unused concessions from 2018 onwards to roll over for a period of up to 5 years providing the individual superannuation balance prior to June 30 was below $500,000. 

As well as amount limits, some age and work test conditions apply. For personal contributions and voluntary employer contributions, the maximum age limit is 75+ and work tests apply for those over 67 years of age.

Salary sacrifice contributions

Salary sacrifice is another way to boost your superannuation growth. It is a pre-tax contribution from your income to your super account. 

Once the arrangement is established between an employee and their employer, regular contributions are made to the employee’s super fund via their payroll. 

Similar to personal deductible contributions, Salary Sacrifice is taxed in the super fund at a maximum rate of 15%. Generally, this tax rate is less than your marginal tax rate.

Some employers may not offer their employees the option to engage in a salary sacrifice arrangement so it is important to check with your employer before researching further.

Talk to a Financial Planner about super contributions

Before arranging personal deductible contributions or salary sacrificing, we encourage you to speak to a Financial Planner to see what will suit your circumstances.

Click here to learn more about APS Financial Planning and to get in touch with our team.