Super contributions – pay direct into your super
Increase your super. Decrease your income tax.
What are voluntary super contributions?
There are now two ways that Australians on a salary can top up their super and enjoy tax benefits.
a) Salary sacrifice, where a portion of your income is paid directly into your super account and gets taxed immediately at a lower rate than your take-home pay.
b) Direct contribution, where you pay into your super account, notify your fund using the ATO form and then claim a tax deduction at the end of the financial year. This is a new option for salaried workers in Australia.
Are there limits to how much I can contribute?
Yes. If you want to claim a tax deduction, the maximum that can be paid into your super account each year (including any salary sacrifice and the super your employer pays you) is $25,000.
If you’re not claiming a tax deduction, then you can pay up to $100,000 per year – a great option if you have received an inheritance or windfall.
When should I make a contribution?
You can make a contribution to your super at any time but most people do this towards the end of each financial year, for two reasons:
a) It’s easier to estimate the total super contributions for the year and avoid going over the caps.
b) If you find it’s too late to arrange for salary sacrifice but still want to enjoy some tax benefit.
Remember, if you want a tax deduction for the 2020/21 tax year, you need to make your contribution in the 2020/21 year.
If you are self employed, you can also make a contribution to your superannuation. This may be tax deductable. The same contribution limitations that apply to individuals will apply. If you are self employed you should seek advice to clarify the options available to you.
What are the tax benefits?
Contributions will normally be taxed at just 15% instead of your marginal tax rate (which could be as high as 45%). A couple of exceptions
- If you earn more than around $250,000 per year you will pay 30% contribution tax.
- These tax rates only apply when your total super contributions are less than $25,000 per year, including employer contributions.
Use our tax savings calculator to find out how much you could be saving.
What if I’m already retired?
Yes, you can still make contributions to your super until you turn 75 years of age. If you are aged 65 to 74 you will need to meet the work test in order to be eligible to claim a tax deduction.
Are there benefits if I’m on a low income?
Definitely. In fact, if you earn less than $54,837 per annum the government can pay up to 50 cents (up to a maximum of $500) for every one dollar you directly pay in yourself. It’s part of the government’s Superannuation Co-contribution scheme.
You might also like
Salary sacrifice: everything you need to know about employer-deducted voluntary payments
Tax savings calculator: how much you can reduce your tax through direct contributions
Co-contribution: government super contribution for those on a lower income
Super projection calculator: see what your super balance is likely to be at retirement (and the difference your contributions can make)
Super Guarantee rates: how much should your employer be paying into your super?