Planning to top up your super?

As we move toward the end of another financial year, it is time to consider if we should be topping up our super.

When looking to make personal contributions to super, there are a number of considerations, including:

1. Type of contributions
Super contributions fall into several categories. The main types include:

Concessional contributions
Contributions made by an employer for the benefit of their employees are treated as concessional contributions. They include compulsory contributions often referred to as superannuation guarantee or “SG” contributions. For the 2022-23 financial year, employers are required to contribute 10½% of their employees' wages or salary to super. This will increase to 11% next financial year.

In addition to SG contributions, an employee may enter a voluntary arrangement to forego part of their salary and request their employer to make additional contributions to super on their behalf. This is referred to as a salary sacrifice arrangement. Depending on personal circumstances, salary sacrificing to super can be very tax effective.

In many situations, individuals can claim a tax deduction for their personal super contributions. These are also treated as concessional contributions.

Concessional contributions are taxed at 15% when they are contributed to super.

For 2022-23, the maximum, or cap that can be contributed as a concessional contribution is $27,500 per person.

However, people with a total superannuation balance[1] of less than $500,000 may be able to carry forward any unused concessional contribution cap that has accrued since 1 July 2018.

Non-concessional contributions

Non-concessional contributions include contributions we make personally or contributions made for our spouse or partner. They are not tax-deductible.

The non-concessional contribution cap is $110,000 for 2022-23 however, people may be able to bring forward up to an additional two-year’s contribution cap and make a non-concessional contribution of up to $330,000 in a single year.

To be eligible to make non-concessional contributions, a person must have a total superannuation balance of less than $1,700,000 and to be able to fully access the three-year bring forward cap, the total superannuation balance must be less than $1,480,000.

Downsizer contributions

In some circumstances, a person, and their spouse, may contribute up to $300,000 (each) of the proceeds from the sale of their home to superannuation.

To be eligible, the home must have been their main residence for at least part of the time it was owned, it has been owed for at least ten years, and they are at least 55 years of age[2] at the time the contribution was made. Contributions must be made within 90 days of receiving the sale proceeds.

Small business CGT contributions

In certain circumstances, a person may contribute the proceeds, or the capital gain arising from the sale of a small business to superannuation without being limited by the concessional and non-concessional contribution caps. Contributions made under the small business concessions are capped at either $500,000 or $1,650,000, depending on eligibility.

Contributing the proceeds from the sale of a business to superannuation can be complex and we recommend appropriate tax and financial advice be obtained.

Government co-contribution

Low-income earners who make a non-concessional contribution to super may receive additional contributions from the government.

The maximum co-contribution is $500. To receive this, a non-concessional contribution of $1,000 needs to be made.

To receive the maximum government co-contribution a person needs to have tax-assessable income, plus reportable fringe benefits and reportable employer super contributions of less than $42,016.

2. Age limitations
Superannuation contributions can generally be made by a person up until the 28th day of the month following that in which they turn 75.

However, mandated employer contributions (i.e. SG contributions) and downsizer contributions are not subject to an upper age limit.

For people aged between 67 and 75 who wish to claim a tax deduction for their personal contributions, a work test needs to be met. The work test requires a person to be gainfully employed for a period of at least 40 hours worked within 30 consecutive days, in the financial year in which they wish to contribute.

3. Claiming a personal tax deduction
When intending to claim a tax deduction for personal contributions, a notice must be given to the superannuation fund informing them of the intention to claim the tax deduction.

This notice must be provided within a prescribed time and before the contribution is applied to a pension account, rolled over to another superannuation fund, or withdrawn from super.

For further information on claiming a tax deduction for personal contributions, see our previous article Claiming a tax deduction for personal super contributions.

4. Timing of contributions
For contributions to be attributed to the 2022-23 financial year, they will need to be received by the superannuation fund by 30 June at the latest. Some superannuation funds may have earlier closing dates.

Importantly, if making superannuation contributions by electronic transfer such as BPAY or as a direct deposit, some days may elapse between processing the payment and it being received by the superannuation fund. Making contributions early is recommended.

Making additional contributions to super can be a valuable strategy for building wealth for retirement. If you are thinking of adding to your super, consider speaking with a licensed financial adviser.

[1] The total superannuation balance includes all money a person has in superannuation, money in transit between superannuation funds, and in certain circumstances, the outstanding balance of borrowings held by a self-managed superannuation fund. The total superannuation balance is calculated as at the previous 30 June.

[2] For contributions made before 1 January 2023, the minimum age limit for contributions was 60 and before 1 July 2022, it was 65.