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
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 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:
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:
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:
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.
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.
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.
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.
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.
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 |
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 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.
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.
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.
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.
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.