How your super can help you save on tax

Along with the Age Pension and the money we save voluntarily, superannuation makes up a key pillar of Australia’s retirement income system. The regular contributions your employer makes to your account are constantly working in the background to help you secure a comfortable retirement. 

But boosting your super by making personal contributions during your working years is also important, and the good news is there are ways to do so that might also be tax-effective. We explore just a few below.


Salary sacrificing

If you can get by on a slightly lower take-home pay, one potentially tax-effective way to boost your super is by salary sacrificing (assuming your employer offers this option). This involves giving up a part of your salary and directing your employer to pay it into your super account instead.

These extra contributions will be taxed in your super fund generally at a rate of 15% instead of your marginal tax rate (which can be as high as 45% for some people).¹ Importantly, your employer is still obligated to pay your full super guarantee — a salary sacrifice arrangement won’t reduce the amount you’re entitled to each year.

Claim a deduction on personal super contributions

Any personal super contributions you make directly into your fund from your after-tax income or savings — are considered non-concessional contributions, meaning tax has already been applied and they won’t be taxed further when received by your super fund.²

But if you claim a deduction, these contributions become concessional contributions and will be treated as if they came from your pre-tax income instead.³ Rather than being taxed at your personal tax rate, your personal contributions will generally be taxed at 15%, with the remaining amount deposited straight into your super account.

Take advantage of government co-contributions

Low and middle income earners who make a personal after-tax super contribution might be eligible for a government co-contribution of up to $500. You won’t need to opt in to receive this — so long as you’re eligible and your super fund has your tax file number, the ATO will pay it automatically.

As for the tax benefits, the ATO makes clear that this payment won’t be included in your taxable income, nor will it be subject to tax when it’s paid to your super fund.⁴

Spouse contributions

If your spouse’s annual income is less than $40,000 and you decide to top up their super account by at least $3,000, you might be able to claim a deduction of up to $540. The full tax offset is available if your partner’s annual income is $37,000 or less — after that, the amount decreases incrementally before phasing out completely at $40,000.5 Just keep in mind that there are certain other eligibility criteria both you and your spouse also need to meet.

This might be helpful if your spouse works part-time, has a low income, or isn’t working at all. A lagging super balance might lead to a less than ideal retirement if it goes unaddressed. By adding even a small amount to your spouse’s account each year, you might be able to increase the chances of securing the retirement you both want.


Sources

1 Australian Tax Office
2 Australian Tax Office
3 Australian Tax Office
4 Australian Tax Office
5 Australian Tax Office

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