3 things you may not know about super
Written and accurate as at: Jan 12, 2023 Current Stats & Facts
Most of us know that making extra super contributions can be a great way to accelerate our retirement savings and boost our income for retirement. But are you making the most of the types of super contributions on offer? We share three things about contributions that might just surprise you.
#1 You may be able to catch up on missed contributions
Before-tax (concessional) contributions can be the most tax effective kind as, provided they are within your concessional cap, they are paid into super before you pay income tax.
And, provided your combined income and before-tax contributions are $250,000 or less, these contributions are taxed at just 15% as they reach your account, which may be much lower than your income tax rate.
The current cap on concessional contributions is $27,500 per financial year. But, the Government’s ‘catch-up’ scheme allows you to carry forward unused concessional cap amounts for up to five years, provided you haven’t used up your full cap in previous years. To be eligible to make catch-up contributions, among other things, your total super balance must be below $500,000 at 30 June of the previous financial year.
Bear in mind that making extra contributions into super may mean that your money is locked away for quite a few years, so it’s important to be sure you won’t need it in the meantime.
#2 Your spouse may be able to contribute to super on your behalf
If your spouse (including your de facto partner) is in a position to make after-tax contributions into super on your behalf, depending on both of your circumstances, they may also be able to claim a tax offset of up to ‘18 percent’ (up to a maximum of $540), when they lodge their tax return.
For your partner to be eligible for this tax offset, among other things, you need to be earning less than $40,000 a year. And, to be eligible for the maximum offset amount, your spouse would need to contribute a minimum of $3,000 to your super, and your annual ‘assessable’ income would need to be $37,000 or less. The tax offset available to your spouse is reduced for every dollar you earn over $37,000 and is phased out when your income reaches $40,000. Of course, even without this tax offset, your retirement savings can still benefit from a boost.
Again, remember that any contributions made by your spouse into your super will be locked away until you can access your super. So it’s important to be sure you won’t need that money until then.
#3 You may be able to boost your super by downsizing your home (from age 55)
From 1 January 2023, the minimum eligibility age for downsizer contributions was reduced from 60 to 55 years of age. So, if you’re considering a sea or tree change, or simply changing homes for your retirement years, depending on your circumstances, you may be able to make a one-off after-tax contribution to super of up to $300,000 ($600,000 for couples) from the proceeds of selling your home.
What’s more, downsizer contributions can be made in addition to other contributions you may be able to make using the concessional and non-concessional caps. To be eligible to make a downsizer contribution, as well as satisfying the age requirements, you also need to meet a number of other criteria.
If you’d like to chat to us about making extra contributions into super, please get in touch.
