Concessional (pre-tax) Non-Concessional (post-tax)
Superannuation is YOUR money, paid to you by your employer and invested on your behalf in preparation for your retirement. To ensure you live more comfortably when you retire, there are additional contributions you can make to boost your assets.
Concessional Contributions (taxable)
- compulsory contributions – also known as employer super contributions (SGC) made on your behalf
- salary sacrifice – voluntary contributions you make paid out of your before-tax income (boosting your super assets and minimising tax payable on your working income)
- tax-deductible personal contributions – voluntary contributions you make with your after-tax income (paid in hand) and then claim a tax deduction for
Note: Concessional Contributions (before tax) are capped at $25,000 per annum (if you were to use a combination of the above you must ensure combined does not breach $25,000 p.a.) If you choose to split your before-tax contributions with your spouse, these amounts still count towards your cap NOT your spouses. If you feel you may breach the cap or wish to contribute more than the cap there are carry-forward rules you may be able to apply.
Non-Concessional (tax-free)
- non-concessional – voluntary contributions you make with your after-tax income (paid in hand) but do not claim a tax deduction for
- spouse contributions – if you spouse make eligible contributions to your super funds
- re-contributions – retirement benefits you withdraw from your super fund and re-contribute to super
- most transfers from foreign super funds
Note: Non-Concessional Contributions (after-tax) are capped at $100,000 per annum. If you feel you may breach the cap or wish to contribute more than the cap there are carry-forward rules you may be able to apply. (some personal contributions may be excluded towards counting towards your cap e.g. money received from personal injury payments or downsizer contributions from proceeds of selling your home – if eligible).
Tax payable on super contributions depends on whether contributions were made before (concessional) or after-tax (non-concessional), whether you exceeded your cap or are a higher income earner.
Concessional contributions (before-tax) are taxed at 15% on the way into your super fund, inside the fund these contributions are classed as a taxable component of super benefits. You will be taxed at your marginal tax rate (receive a tax offset of 15%) if you receive an income stream between the ages of 55-59. If you receive as a lump sum, you can withdraw funds tax-free up to your low rate threshold (does not include a tax-free component of the fund). Amounts above low rate threshold will be taxed at 17% (incl. medicare) or your marginal tax rate (whichever is low) Upon reaching age 60 and over these taxable portions of your super fund will become tax-free.
Non-Concessional Contributions (after-tax) are not taxed on the way into your super funds (as you have already paid income tax), inside the fund these contributions are classed as a tax-free component of super benefits. In addition, these funds are received by you tax-free even if you reach a condition of release and are age 60 and under, so no matter what age you are.
Concessional: paid before tax = taxable
Non-Concessional: paid after-tax = tax-free
Things to Consider
- Timing of Contributions – Make sure your super fund receives all your contributions by 30 June. (It is up to you to keep track of all of your contributions.)
- Contribution Caps
- Implications if you exceed contributions caps
- Tax implications of contributions
- Taxable and Tax-free benefits
Note: Contributions can also be used as part of your First Home Super Saver Scheme strategy
If you would like assistance in boosting your superannuation assets and the best tax effective outcomes for you, speak to a professional or contact our office.