With the end of the current financial year fast approaching, time is running out if you’re planning to boost your superannuation balance before 30 June.
Even depositing a small amount of extra money into your super account before 30 June this year could make a big difference to your overall retirement balance over the longer term, thanks to compounding investment returns.
Below are five ways you could be able to add more into your super fund account before 30 June, subject to various conditions.
Concessional (before-tax) contributions
You’re able to have up to $27,500 in concessional (pre-tax) contributions deposited into your super account each financial year, which include compulsory Superannuation Guarantee payments made by your employer and any personal contributions you choose to make.
Concessional contributions are taxed at 15%, instead of your marginal tax rate.
If you’re currently below the annual limit you could take the opportunity to add personal contributions into your super account before 30 June. This can be done either from your pre-tax salary via an existing salary-sacrifice arrangement through your employer, or by using after-tax money to deposit funds directly into your account.
If you deposit after-tax money into your fund, you may be able to claim a tax deduction in your next tax return given that concessional contributions are taxed at 15%.
However, to claim a deduction, you must complete an Australian Tax Office (ATO) form advising your super fund. You must also receive an acknowledgement from your super fund. And both these things will need to happen before you lodge your next tax return.
Keep in mind that this is usually a busy time of the year for super funds, so there could be processing delays. Many super funds have a June cut-off date for processing personal super contributions, which can be one to two weeks before the end of the financial year.
Be aware that if you exceed the total annual limit of $27,500 at 30 June the ATO may require you to pay additional tax.
To avoid exceeding the annual limit it’s important to add up your employer contributions during the financial year plus any extra contributions you’ve already made, and then calculate the concessional contributions balance that’s left.
(Note: The annual concessional contributions limit will rise to $30,000 from 1 July, 2024).
You may have another option available that will enable you to get more concessional contributions into your super account before 30 June.
That depends on whether you’ve used up your maximum concessional contributions amount this financial year (that is, you’ve already contributed $27,500).
In 2018-19 the Federal Government introduced rules allowing people to carry forward their unused concessional contributions for up to five financial years. Any unused contributions from 2018-19 need to be used by June 30 this year or the opportunity to use them will be lost.
(See Clock is ticking on a super free kick for more detailed information on carry forward contributions).
For example, if $15,000 in employer and personal concessional contributions were made into your super account in 2018-19, you may be able to take advantage of your unused $5,000 gap from that financial year (the maximum concessional contributions limit was $20,000 in 2018-19) and roll it over into this financial year's contributions.
This $5,000 would be in addition to the maximum $27,500 in allowable concessional contributions that can be made this financial year (allowing you to contribute up to $32,500 in this example).
For many Australians the unused portion of concessional contributions available from previous financial years may add up to tens of thousands of dollars.
The qualifications are that you must have made concessional contributions in the financial year that exceeded your general concessional contributions cap, and your total super balance (covering all your super accounts) must be below $500,000 as at June 30 of the previous financial year.
You can view and manage your concessional contributions and carry-forward concessional contributions by accessing the ATO’s online services by logging in to your myGov website account.
Non-concessional (after-tax) contributions
Non-concessional contributions are after-tax personal contributions you may be able to make into your super fund, which can’t be claimed as a tax deduction.
They’re separate from your annual concessional contributions and are subject to their own annual limits.
The main advantage of making non-concessional contributions is to accumulate more of your money inside the super system.
Earnings from any investments inside your super account before age 60 are taxed at 15%. After age 60, if you have stopped work and access your super as a pension income stream, your investment earnings and the payments you receive are tax free.
Typically, non-concessional contributions are made using the proceeds from larger asset sales. But there’s no minimum non-concessional contribution amount.
The non-concessional contributions maximum limit is currently $110,000 each financial year. However, under what’s known as the “three-year bring-forward rule”, you may be able to make a $330,000 non-concessional contribution in one financial year.
You’re then unable to make further non-concessional contributions for the next three financial years.
(Note: The annual non-concessional contributions limit will rise to $120,000 from 1 July, 2024, and the three-year bring-forward limit will rise to $360,000).
If you have more than $330,000 to contribute in total, you could make use of the current annual $110,000 limit before 30 June this financial year. Then, from 1 July, you could use the incoming higher three-year bring-forward limit to contribute up to another $360,000.
Seek professional advice if needed as there are circumstances where the “bring-forward” rule does not apply.
Home downsizer contributions
Although this option isn’t strictly tied to the financial year end, you may be able to contribute up to $300,000 into your super fund using proceeds from selling your principal place of residence if you’re aged 55 or older. Couples can contribute up to $300,000 into their super each.
A downsizer contribution forms part of the tax-free component in your super fund. It can be made in addition to non-concessional super contributions and doesn’t count towards the annual contributions cap.
Ultimately, however, any downsizer contribution you make will count towards your transfer balance cap when you eventually move your super into pension phase.
There are a range of conditions around downsizer contributions, and it’s prudent to check these on the ATO website.
You or your spouse must have owned your home for 10 years or more prior to the sale, with your ownership calculated from the date of settlement when you bought your home.
There’s also a strict definition of what constitutes a home. It must be in Australia and can’t be a caravan, houseboat, or a mobile home.
You’re unable to use the downsizer scheme to deposit funds from the sale of an investment property. These can only be done through a non-concessional (after-tax) super contribution.
A downsizer super contribution must be made within 90 days after you receive the proceeds of your home sale. The ATO will allow for a longer period due to circumstances beyond your control.
It’s prudent to check all the conditions and your eligibility on the ATO website or seek tailored advice from a financial adviser.
Spouse contributions
The ATO allows couples to split up to 85% of their annual employer concessional contributions, as well as additional salary sacrifice and personal super contributions.
But any splitting of contributions must be done after the end of the financial year in which the super contributions were made.
Super splitting can be done at any age, but a spouse must be either less than their applicable preservation age (the age at which they can access their super) or between their preservation age and 65 years, and not retired.
Couples wanting to split their super contributions first need to check whether their super fund allows it.
The full guidelines around contributions splitting, including eligibility and the application form that needs to be completed, are available on the ATO’s website.
Consider an adviser
Super and retirement planning is a complex area.
Take care to understand the contributions types and limits carefully as there are significant tax penalties for exceeding the applicable contributions caps.
There are also aged-based limits on contributing into super.
If you’re unsure about your super options before June 30 and need some advice, consider consulting a licensed financial adviser.
