Money going into your super

Decisions you make now about your super, like how much you contribute and where to invest, could impact the level of financial security you have when you retire. So, understanding more about your contribution options can help you take control and make your retirement goals more achievable.

Although your employer will generally make super contributions on your behalf, for many people employer contributions alone will not be enough to provide a comfortable lifestyle in retirement.

There are a number of ways you can build your super:

  • salary sacrifice; and
  • personal contributions.

Employer Superannuation Guarantee (SG) contributions

Superannuation Guarantee (SG) contributions are the minimum employer contribution that most employers must pay their employees. These are also known as
concessional contributions.

The current SG rate is 9.5% of an employee’s ordinary time earnings if they earn a minimum amount of $450 (before tax) in a calendar month. The rate will
gradually increase to 12% in future years.

Some employers may be required to pay more than the SG rate for employees covered by an award or other workplace arrangements. 

SG contributions are usually subject to contributions tax at the rate of 15%. There is no limit on the amount of concessional contributions the Fund can accept, however limits applies for tax concession purposes.

Employers’ SG liability applies to all employees, including those aged 75 and over. Low-Income Superannuation Contribution (LISC) LISC is a government super payment of up to $500 per financial year to help low income earners save for their retirement. The LISC is 15% of the concessional (before tax) contributions you or your employer makes from 1 July 2012 until 30 June 2017. The maximum payment you can receive for a financial year is $500 and the minimum is $10. 

For further information about eligibility and how to apply for LISC, visit the Australian Tax Office (ATO) website.

Salary Sacrifice

Salary sacrifice is an arrangement you can make with your employer to have part of your before-tax salary redirected to your super. 

The before-tax salary that is “sacrificed” to your super generally gets taxed at the special rate of 15%. It’s also referred to as a “concessional contribution”
because it is taxed at a concessional rate which is generally lower than your marginal rate of tax.

For the 2016/17 financial year, the concessional contribution cap will be $30,000 for individuals aged under 50 and $35,000 for individuals aged 50 or over in that financial year.

See more information on Salary Sacrifice below:

 

How much salary can be sacrificed?

There is generally no limit to the amount of salary that you can sacrifice however there is a limit to how much you can add to your super each financial year at the concessional rate of 15%, which is called the concessional contributions cap.

If you contribute more than the concessional contribution limit, the ATO will include this in your assessable income which will be taxed at your marginal tax rate (plus Medicare Levy). They may also add an excess contributions charge to your account. The ATO will get in touch and let you know about this. We strongly encourage you to provide your Tax File Number to us as additional tax may be applied to your account if we don’t have it. See ato.gov.au for further details.

Is salary sacrifice right for me?

Salary sacrifice can be a good way to save tax and boost your super. Of course, like most financial decisions, this depends on your personal circumstances, including income and tax rates. Before deciding to salary sacrifice, you should consider carefully all the facts and decide whether a salary sacrifice arrangement for super is right for you.

What rules apply to a salary sacrificing?

To sacrifice some of your salary to super you should enter into a formal agreement with your employer. It is advisable that all the terms of the agreement, including its effect on SG contributions, are clearly documented to ensure your employer calculates your 9.5% SG contribution on your
original salary.

Like all good things, there are some considerations on how salary sacrifice operates. Most importantly, salary sacrifice contributions:

  • are an agreement between you and your employer;
  • must be made to a complying super fund;
  • generally incur 15% contributions tax when received by the fund (as no income tax has been paid on them);
  • are preserved, which means they must generally remain in super until you retire on or after preservation age or reach age 65; and
  • are made before-tax and do not count towards the Government co-contribution.

How do I make salary sacrifice contributions?

You’ll need to get in touch with your employer or payroll officer and ask them to set up a salary sacrifice arrangement for you.

To assist you Kinetic Super has a Contributions Calculator

Personal after-tax contributions

Personal after-tax contributions are any additional amounts paid directly into your super. They are also known as “nonconcessional contributions” because you receive no tax deductions for these contributions.
 

The following after-tax contributions don’t get taxed when they enter your super account because you’ve already paid tax on that money:

  • some amounts you transfer from overseas funds
  • excess concessional contributions
  • spouse contributions.

 

Non-concessional contribution limit

The Government has set limits(contributions cap), on how much non-concessional contributions you can make before you pay extra tax.

For the 2016-17 financial year, the annual nonconcessional contributions cap is $180,000 however from 1 July 2017, this will reduce to $100,000.

The bring-forward rule basic conditions are:

  • It applies to non-concessional contributions – that is contributions for which a tax deduction is not claimed.
  • It is automatically triggered in the first year that the contributions go over the annual limit.
  • You must be aged under 65 at any time in the first financial year (i.e. the year the 3-year rule is triggered).
  • If you’re aged 65 or more in the 2nd and 3rd years you can continue (but not trigger).
  • Contributions under the 3-year ceiling (subject meeting to Work Test requirements).
  • If you’re aged 65 years or more, the maximum you can contribute up to the annual non-concessional contributions cap for that financial year (subject to meeting Work Test requirements).
  • If you exceed these limits, the excess will be taxed at the top marginal personal tax rate of 49% including the Medicare Levy of 2% and the Temporary Budget Repair Levy of 2%.
  • The Fund may not accept excess contributions above the cap.
  • 10% or more of your total income is from eligible employment and/or running a business.

 

For further information or bring-forward examples, visit ato.gov.au.

 

The government co-contribution scheme

Grow your super with help from the Government. If you make up to $1,000 in after-tax contributions to your super during the financial year, the government will match your contribution by 50%, if you meet certain conditions.

See more information on the government co-contribution scheme below:

 

Am I eligible?

To be eligible for the Government super co-contribution you need to meet the following:

  • You provide us your TFN and make a personal (after-tax) super contribution to us during the financial year.
  • Your total income is less than the upper income threshold ($51,021 for the 2016/2017 financial year).
  • 10% or more of your total income is from eligible employment and/or running a business.
  • You’re a permanent resident of Australia.
  • You lodge an income tax return for the relevant financial year.
  • You’re less than 71 years old at the end of the year of income.

How do I make personal contribution to Kinetic Super?

We make it easy for you to make personal contributions:

  • One off contribution – you can make a member voluntary contribution at any time by BPAY®.
  • Regular contributions – can be set up as a direct debit through your online account at kineticsuper.com.au.
  • Payroll deduction – you can arrange for your employer to regularly deduct an agreed amount from your after-tax pay and send it to Kinetic Super.

Can I choose which super fund the co-contribution is paid into?

The co-contribution will generally be paid directly into the same super account that you paid your personal super contribution. If you wish to have your co- contribution paid into a particular super fund, you can complete the Australian Taxation Office (ATO) Superannuation Fund Nomination form or phone the ATO on 13 10 20.

How will I know that a co-contribution has been paid?

You’ll receive confirmation from the ATO after it has been paid to us. You’ll also be able to see it in your “Transactions” section of your next statement and you can also view account information via Member Online Services at kineticsuper.com.au.

How much might I receive?

The maximum co-contribution of $500 will apply if you have an income of $36,021 or less and have a made a personal contribution of at least $1,000. This amount will reduce for each additional dollar of income above $36,021 (cuts out when your income reaches $51,021 for the 2016/2017 financial year). If your co-contribution entitlement is greater than $0 and less than $20 the Government will pay the minimum amount of $20.

 

If you make a personal contribution of $1,000 in the 2016/2017 financial year, the Government co-contribution you would receive is below:

Total Annual Income* (before tax) Maximum Government Co-contribution
Up to $36,021 $500
$40,000 $348
$45,000 $182
$50,454 or more $0
* Assessable income, plus total reportable employer super contributions, plus reportable fringe benefits for the financial year less allowablebusiness deductions (if applicable). This may be different to your taxable income.

 

For further information on super contributions, refer to the ATO website, ato.gov.au.

Definition of spouse

A Spouse is defined as someone you are either legally married to or in a de facto relationship with. This can be someone of the same or of a different sex.

See more information on definition of spouse below:

 

Tax offset for spouse contributions

Either you or your partner may be entitled to claim a tax offset up to a maximum of $540 per year for contributions made on behalf of their non-working or low-income spouse, if their assessable income (reportable fringe benefits and reportable employee super contributions) is less than $13,800 a year.

The offset is calculated as 18% of the contributions made to a complying super fund, up to a maximum contribution limit of $3,000 p.a. The offset reduces gradually as the spouse’s income increases above $10,800 and will completely phase out where the spouse’s assessable income is $13,800 or more.

Who is eligible for the offset?

The offset is available if you are an Australian resident and tax payer making after-tax contributions
on behalf of your low-income or non-working resident spouse. The assessable income of the spouse must be within the above ranges and the offset does not apply if you are entitled to a deduction for the contributions as the employer of the spouse.

Is there a limit on spouse contributions?

Spouse contributions count towards the receiving spouse’s non-concessional contribution cap. There is, also, a limit on the contributions for which an offset can be claimed.

How are spouse contributions treated for taxation purposes?

Eligible spouse contributions are:

  • Non-concessional (after-tax) contributions
  • Tax-free when eligible to be withdrawn on or before retirement subject to the low rate cash threshold, and are counted towards the receiving spouse’s contribution limit.

We can’t accept spouse contributions unless your spouse has supplied their TFN to us. The contributing spouse needs to claim the tax offset through their tax return. It is not an automatic process.

Non-concessional (after tax) contributions are not subject to contributions tax. However non- concessional contributions are limited to $180,000 per year or $540,000 over 3 years for people under 65 years of age. Contributions above these limits will be taxed at the top marginal rate of 49% (which includes the Medicare Levy of 2% and the Temporary Budget Repair Levy of 2%).

If your spouse is between the age of 65 and 70, they must have worked 40 hours for 30 consecutive days
to be able to accept the payment. All personal contributions made by an eligible spouse are treated as non-concessional contributions and must be preserved until they reach preservation age or retirement.

How to make a spouse contribution?

If you would like to make a spouse contribution, please complete and return the Spouse Contribution form or on request by calling 1300 304 000.

 

What is contribution splitting

Contributions splitting is when you rollover a portion of your recent concessional (before-tax) contributions to your spouse’s complying super fund.

You can apply to split contributions regardless of your own age, but your spouse must be either:

  • Less than 55 years old; or
  • 55 to 64 years old and not retired.

 

 

What contributions can be split?

You can split the lesser of:

  • 85% of any employer contributions (which includes Superannuation Guaranteed and salary sacrifice contributions; plus any personal contributions you have made for which you have advised the Fund that you have claimed a tax deduction for (generally for self-employed people); and
  • The concessional contributions cap for 2014/15 is $30,000 for anyone aged under 49 years as at 30 June 2014 and $35,000 for anyone aged 49 years or over as at 30 June 2014.
     

The following table provides details of what can and can’t be split.

Splittable Contributions Non-Splittable Contributions
Employer contributions Personal contributions that you can’t claim a deduction for (employees can’t claim this deduction)
Salary sacrifice contributions Contributions you make a CGT cap election for small business or with a personal injury election
Personal contributions that you claim a deduction for (self-employed people may be able to claim this deduction) Directed termination payments
  Transfers from foreign funds
  Contributions made by your spouse to your super
 

Why do people split their contributions?

Whilst split contributions remain preserved until the receiving spouse meets a condition of release, you may wish to split your contributions because:

  • Your spouse is older than you and may be able to access super benefits earlier than you can, or
  • If both you and your spouse wish to retire between the age of 55 and 59 and you wish to maximise the benefits that you can receive tax free, or
  • Your spouse is younger than you and transferring contributions may enable you to qualify for a higher age pension under the Centrelink/ Department of Veteran’s Affairs assets test.

Spouses are defined as someone you are either legally married to or in a de facto relationship with. This can be someone of the same or of a different sex.

Contribution splitting

Contribution splitting does not reduce what must be counted towards your concessional cap. The Fund reports to the ATO all contributions that were made for you, including any contributions that were later transferred to your spouse after a contributions splitting application.

When can you split your contributions?

You have until 30 June each year to request a split of concessional contributions that were made in the previous financial year. For example you must apply by 30 June 2015 to split contributions made to the Fund for the period of 1 July 2013 to 30 June 2014.

If you’re transferring your money out of the Fund during the year, you can request to split contributions that have been paid into the Fund since the previous 1 July. The split will be processed before any other payment is made. No splits will be processed once your account is closed.

Cost and rules on the amount

The member requesting the contribution split must maintain a minimum fund account balance of $1,500 after the split.

Members may make only one split request each financial year and cannot specify from which investment option it is to be made. The amount to be split will be drawn down from existing investment account balances on a proportional basis. A withdrawal fee of $50 applies to each contribution split processed.

How to make a contribution split to the superannuation account of your spouse?

To split the contribution to the superannuation account of your spouse, you will need to complete and return the Contribution Splitting form or on request by calling 1300 304 000 and provide the appropriate proof of identity.

How do I make extra contributions

Make extra personal contributions to your account through:

  • Member Online Services - for a once off payment or set up a regular direct debit
  • Payroll deduction agreement with your employer.

Curious to know how adding $10, $30, or $50 extra a week to your super might mean in retirement? Try our Contributions calculator.

You can also make salary sacrifice and spouse contributions.