Your employer is making compulsory super guarantee (SG) contributions on your behalf, but how can you make your super grow faster?
There are two types of voluntary superannuation contributions:
- Concessional contributions, which include contributions made before-tax is applied to your income, such as salary sacrifice, or to reduce your tax payable, such as personal deductible contributions. (SG payments also count as concessional contributions.)
- Non-concessional contributions, which include contributions made from your savings or monies from other sources, such as property net proceeds or inheritance, where tax has previously been applied.
There are limits on how much you can contribute to super before you are forced to pay extra tax. (Read more about how super is taxed.)
The non-concessional (after-tax) contributions cap for the 2021/22 financial year is:
- $110,000 per year; or
- $330,000 in a rolling three-year period under the bring forward provision. If you’re under age 67, you can bring forward two years of non-concessional contributions without triggering a tax penalty.
There’s more good news. If your total assessable income is less than $56,112 in the 2021/22 financial year and you make a voluntary after-tax contribution, you may be entitled to a Government Co-contribution payment.
To discuss your super contributions for this financial year, or for more details about contribution caps, speak to our Member Services Team on 1300 360 988.
THE CARRY–FORWARD (OR “CATCH-UP” RULE)
As we now know, the concessional contribution cap is currently $27,500 per financial year. But can you contribute more than $27,500 in a year?
For some, the answer will be ‘yes’.
Using the carry-forward rule, you can “catch up” by carrying forward any unused concessional cap contributions since the 2018/19 financial year into future years. By bunching together your unused cap amounts, technically, you’re contributing more than $27,500 in a single financial year, but you’re not breaking any rules.
For example, if you contributed only $15,000 to super last financial year, you could contribute $37,500 this financial year.
What are the benefits?
This rule gives you the flexibility to contribute larger amounts and maximise past concessional contribution caps that would otherwise go to waste. This can be particularly helpful in the period leading up to retirement when you’re looking to boost your super to use as future income.
Do any conditions apply?
Yes. Here are the key things you need to know.
- This rule only applies from the 2018/19 financial year onwards.
- Unused cap amounts will expire after a rolling five-year period.
- The total super balance across all your super accounts must be less than $500,000 at the end of the financial year before you use the carry–forward rule.
We recommend seeking advice from a First Super Financial Planner to help you work out any unused carry-forward amount and the best way to use it.
Work Test and Work Test Exemption
There are age-related conditions under which a super fund can accept member contributions.
If you are aged between 67 and 74 years old at the end of the income year in which you made the contribution, you need to satisfy a Work Test or meet the Work Test Exemption criteria.
To satisfy the Work Test, you must work at least 40 hours during a consecutive 30-day period each financial year in order for First Super to accept a voluntary contribution.
To meet the Work Test Exemption criteria, you must:
- have satisfied the work test in the financial year preceding the year in which you made the contribution,
- have a total super balance of less than $300,000 at the end of the previous financial year, and
- have not previously used the Work Test Exemption.
The Work Test Exemption applies from 1 July 2020.