Types Of Super Contributions
Super Guarantee (employer contributions):
The compulsory rate of super contributions that employers need to make to their employees super funds is known as the Super Guarantee. Currently, the standard super guarantee rate is 10.50% of your pre-tax salary and is slated to increase as follows:
|1 July 2023 – 30 June 2024||11.00%|
|1 July 2024 – 30 June 2025||11.50%|
|1 July 2025 – 30 June 2026||12.00%|
Is contributing an additional amount (above your super guarantee) of your pre-tax salary into your super fund.
This is generally a tax effective strategy, as long as your marginal tax rate is higher than the 15% contributions tax.
For example, if you earn $60,000 per year (37% tax bracket) and you organise with your employer to salary sacrifice $1,000 into super, you will then save $370 income tax and pay $150 contributions tax- thus reducing your total tax exposure by $220.
You must make sure that you do not make more than $27,500 per year in concessional contributions. This includes your super guarantee, as any amount above $27,500 gets taxed at the highest marginal tax rate (45%).
The government co-contribution is available to anyone earning less than $52,697 per year (before tax) with the full benefit of 50c for every $1 contributed (up to a maximum of $500) being available to those earning under $37,697 per year.
E.g. if you earn $35,000 for the financial year and you make an after tax contribution into your super during the same financial year of $1,000 then after you’ve completed your tax return the government will contribute $500 into your super fund. If you contributed $500 the co-contribution would be $250.
To see if you’re eligible for a government co-contribution please use the ATO’s Super Co-contribution Calculator
If you’re spouse earns below $40,000 per year, then you may be eligible to claim up to a $540 tax offset for contribution into their fund.
Spouse contribution splitting
You can also split your employer super contributions with your spouse. However, contribution splitting can only be done after the end of a financial year. This needs to be organised through your super fund.
Once you understand the different types of contributions and how they apply to you, it’s a good idea to put a plan in place and take action.
If you would like assistance with planning your super contributions, you may want to get super advice and discuss your options with an advisor.