Contributing to super
Who can contribute?
Anyone under age 65 can contribute to super and people aged 65 to 74 can contribute if they have worked at least 40 hours in a 30 day period in a financial year.
How can I contribute?
Employees
Employers are required to contribute 9 per cent of an employee’s salary to their account in the employer’s default fund, or another super fund of the employee’s choice. This means employees benefit from the discipline of investing regularly through all market cycles, averaging out the entry price of their investments, otherwise known as dollar-cost-averaging. Most employers make these compulsory contributions from employees’ pre-tax salaries and they can be increased by arrangement between you and your employer. This is known as salary sacrifice.
The annual cap covering employer, pre-tax voluntary salary sacrifice contributions and tax-deductible contributions is $25,000 for people under age 50. People aged 50 to 74 are generally able to contribute up to $50,000 per year in tax-deductible contributions as long as they have super balances of less than $500,000. The contribution caps provide a strong incentive to make substantial contributions earlier in life and maximise contributions whenever possible.
In addition to pre-tax and tax-deductible contributions, anyone who passes the basic age and work test can also make their own after-tax contributions. For people under 65 the cap is $150,000 per year or $450,000 over three years, and for those aged between 65 and 74 it is $150,000 per year.
Self employed, homemakers and retirees
Self employed, homemakers, and retirees who pass the work test and earn less than 10% of their total income as an employee, are able to claim their after-tax contributions as a tax deduction. This is subject to a $25,000 annual cap for people aged under 50 and up to $50,000 per year for those over 50 (if they have a super balance of less than $500,000. For after-tax contributions for people under 65 the cap is $150,000 per year or $450,000 over three years, and for those aged between 65 and 74 it is $150,000 per year.
Small business
When small business owners sell their assets (eg their company shares) and transfer it to super they may receive capital gains tax concessions as well as the ongoing benefit of having their retirement nest egg in a tax effective structure. They may also be able to contribute up to $1.1 million to super from the sale of business assets over and above the usual contribution limits.
Low income earners – government contributions
For people earning under $61,920 in a year who make after-tax contributions to super, the government will match that contribution up to $1,000 for people earning less than $31,920, reducing on a sliding scale for incomes up to $61,920.
Spouse contributions
If your spouse earns less than $13,800 pa, you may be eligible for a tax offset of up to $540 if you make after-tax contributions to their super account.
