Building your super balance
Small and regular contributions could be one way to increase your super balance.
What’s the difference between making a concessional contribution and a non-concessional contribution?
There are two types of contributions that can be made to your super account, concessional contributions and non-concessional contributions:
1. Concessional contributions include compulsory employer contributions, salary sacrifice contributions and personal contributions claimed as a tax deduction. For more information see:
- How to make salary sacrifice contributions; and
- How to make personal contributions claimed as a tax deduction (referred to as "concessional contributions")
2. Non-concessional contributions include, but aren’t limited to, personal contributions that have not been claimed as a tax deduction (referred to as “after-tax contributions”). For more information on how to make after-tax contributions, continue reading this page.
What’s the potential benefit of making after-tax contributions?
Making after-tax contributions to your super can be an effective way to increase your retirement savings. You can either make a one off payment or regular after-tax contributions to suit your financial circumstances. As these contributions are made from your after-tax income or savings, they don’t attract contributions tax, as you’ve already paid tax on your income or savings.
By setting up small, after-tax contributions today, you could boost your super balance – potentially without noticing a significant difference to your disposable income.
What contribution caps apply to after-tax contributions?
A cap applies to the amount of after tax contributions that you may contribute to super.
Since 1 July 2017, the maximum after-tax contributions you can make are $100,0001 pa or $300,0001 by bringing forward two years’ worth of contributions. However, after-tax contributions can’t be made if you had a total super balance of $1.6 million2 or over on the 30 June of the previous financial year. If you exceed your contribution cap, you will be penalised. Further information is available by visiting the Australian Tax Office (ATO) website.
Who can make after-tax contributions?
You can make after-tax contributions if you’re aged 64 and under, or if you’re between age 65 and 74 and meet the work test (which means you’re working at least 40 hours over 30 consecutive days in the financial year the contribution is being made), or are eligible to apply for the work test exemption6.
If you’re considering making an after-tax contribution, we recommend you speak to a financial adviser. Further information is available by visiting the ATO website.
Why should you invest in super?
Investing in super can be a tax effective way to boost your super and save for your retirement.
The Association of Superannuation Funds of Australia (ASFA) provides a detailed description of what singles and couples who are relatively healthy and own their own home would need to budget per year to be able to enjoy either3:
- A modest retirement lifestyle that is considered better than relying on the Age Pension, but still only able to afford fairly basic activities.
- A comfortable retirement lifestyle that enables an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as; household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel.
However, you may strive to have an even more luxurious lifestyle with frequent travel, living well without adjusting the lifestyle you’re accustomed to or the worry of outliving your savings. So why not take matters into your own hands and make sure you’re meeting your retirement goals?
Making concessional contributions can be an effective way to boost your super and reduce your assessable income. Concessional contributions include compulsory employer contributions, salary sacrifice contributions and personal contributions claimed as a tax deduction.
What are the potential benefits of making concessional contributions?
If you make a personal super contribution, you may be able to claim the contribution as a tax deduction and reduce your assessable income.
Concessional contributions will generally be taxed in the superannuation fund at the concessional rate of up to 15%4 instead of your marginal tax rate, which may be up to 47%5. Depending on your circumstances, making concessional contributions could result in a tax saving of up to 32% and enable you to boost your super.
What contribution caps apply to concessional contributions?
A cap applies to concessional contributions (including compulsory employer contributions) made to super. Since 1 July 2017, the cap is $25,000 for everyone. Penalties apply if you exceed the concessional contribution cap. Further information on concessional contribution caps is available by visiting the ATO website.
Who can make concessional contributions?
On 1 July 2017, the rules that related to claiming a tax deduction for personal contributions you make to super changed. All individuals who are eligible to make a personal contribution to super are able to claim a tax deduction.
You can make personal super contributions (concessional or non-concessional) if you’re aged 64 and under, or if you’re 65 - 74 and meet the work test (which means you’re working at least 40 hours over 30 consecutive days in the financial year the contribution is being made)6.
How do you claim the tax-deduction?
To be eligible to claim the personal super contribution as a tax deduction, you need to submit a valid ‘Notice of Intent’ form to your super fund. You’ll also need to receive an acknowledgment from the super fund before you complete your tax return, start a pension or withdraw or rollover money from the fund to which you made your personal contribution.
For more information, or to determine if you’re eligible, visit the ATO website and speak with your registered tax agent.
Please note that there are special rules for contributions toward a Defined Benefit interest. For more information, visit the ATO website.
The information on this web page is of a general nature only and has been prepared by the Trustee without taking into account your objectives, financial circumstances or needs. Before acting on any of this information, you should consider whether it is appropriate to your objectives, financial circumstances and needs, and seek appropriate professional advice. You should not rely on this information to determine your personal tax obligations, please consult a registered tax agent for this purpose.
1 Current for 2017/18 financial year. The bring forward rule is limited to those under age 65. For more details on the contribution rules, please refer to ato.gov.au.
2 Current for 2017/2018. Total super balance includes super savings in accumulation accounts and income streams.
3 ASFA Retirement Standard 2018.
4 Individuals with income for surcharge purposes (disregarding their reportable super contributions) and low-tax contributions above $250,000 in the 2017/18 financial year will pay an additional 15% tax on personal deductible and other concessional super contributions within the concessional contributions cap.
5 Includes Medicare Levy.
6 An exemption from the work test is available from 1 July 2019. The exemption allows you to make voluntary contributions to your super without the need to satisfy the work test, for one financial year only. This is available to recently retired individuals aged 65 - 74, who have a total super balance less than $300,000 (prior to the most recent 30 June), and met the work test for the previous financial year. Also, this can only be applied once in your lifetime.