How to top up your super
by Verve Super
When it comes to topping up your super, the time is now. Superannuation is a long term investment that thrives on a little short term focus.
The benefits of investing extra in your super (and self) today will pay dividends in the years to come thanks to the power of compound interest. Plus, it just feels really damn good to know that you’re taking an extra step to financially support future you, today.
Deciding how much to contribute to your super is personal and depends on several factors such as your income, how long you have until retirement, and your personal tax requirements. That’s why it’s important to know what your goals are for retirement savings and to have a plan for how to reach your goal (and check how current super and tax rules will apply to you).
The good news is that once you have a plan in place, the process of growing your super balance is simple.
In this guide, we’ll be covering four ways to boost your super, including:
- What are concessional contributions (a.k.a. Tax-deductible contributions)
- What are non-concessional contributions (a.k.a. After-tax contributions)
- How to harness the low-income super tax offset
- How to make a personal contribution as a Verve member
Translation: payments from your pre-tax income that are tax-deductible
Concessional super contributions are payments put into your super fund from your pre-tax income or contributions you make that are tax deductible. Making extra concessional contributions to your super can be a great way to top up your balance and reduce your tax (if you earn over $37,000 per year).
So, what counts as a concessional contribution? Typically, this includes:
- The superannuation your employer pays under the super guarantee (SG)
- Additional contributions made by your employer through a ‘salary sacrifice arrangement’
- Contributions that you make as a self-employed person and any other personal contributions you make
What caps apply to concessional contributions?
There is an annual cap for this financial year of $27,500 for this type of contribution. It’s up to you to keep an eye on whether or not you have reached this cap, although you can check out your remaining concessional contributions via your MyGov account.
As of July 1st 2018, you can carry forward any unused amount of your cap from the current year, for up to five years (thanks to the Carry forward rule) — if you have a balance of less than $500,000 on 30 June of the previous financial year.
To make additional concessional contributions, you can either organise a ‘salary sacrifice’ agreement with your employer or make a personal contribution and claim it as a tax deduction.
To make a tax-deductible personal contribution:
- Check your eligibility
- Make the payment into your super fund
- Notify your superannuation fund with a Notice of Intent to claim
Non Concessional Contributions
Translation: payments from your after-tax income or money from your spouse
Non-concessional contributions are payments made by you from your post-tax salary (or contributions from your spouse).
What caps apply to non-concessional contributions?
The cap for after-tax contributions for the current financial year is $110,000 if your total super balance is less than $1.7 million or $330,000 over a 3-year period if you are aged under 65 under the ‘Bring forward rule’.
To make an additional non-concessional contribution, simply deposit your personal money into your super. Although you will have already paid tax on this income, there are still some potential benefits to making additional contributions, including a lower tax on investment earnings and potential government co-contributions.
There is no need to notify the ATO when you make after-tax contributions, however, you still need to stay within the non-concessional cap and eligibility requirements.
Low-income superannuation tax offset
If you earn $37,000 or less, you may get a ‘low-income superannuation tax offset’ (LISTO) from the government.
The amount, up to $500 annually, will be 15% of the concessional contributions you or your employer made to your super account during the financial year. The good news? You don’t need to do anything! The ATO will work out your eligibility and pay your low-income super tax offset directly into your super account.
Make sure your super fund has your tax file number (TFN) so you don’t miss out on the payment.
How to make a Personal contribution at Verve?
If you’re a Verve member, you can set up personal contributions by:
- Logging into your online portal
- Select the menu item on the top left and choose ‘Make a personal contribution’
- Complete the online form and then follow the payment instructions to complete the bank transfer
Navigating the super system can be a challenge and at times it feels like a rabbit hole of information. We’re big believers in using knowledge as power and as a big ol’ confidence boost. If you are looking for more information, you can learn through our Verve online money courses or download our ultimate tax time guide to show tax time who’s boss.
Please note any information provided is general in nature and should not be considered personal financial advice. We recommend you speak to a qualified financial adviser for personal advice.
This blog is published by Verve Superannuation Pty Ltd (ABN 65 628 675 169, AFS Representative No. 001268903), which is a Corporate Authorised Representative of True Oak Investments Ltd (ABN 81 002 558 956, AFSL 238184), as the Sub-Promoter of Verve Super.
Verve Superannuation Pty Ltd and True Oak Investments Ltd are not licensed to provide personal financial advice. The information contained in this blog, including any financial guidance, is general in nature. You should consider seeking independent legal, financial, taxation or other advice to ensure that your financial decisions are suited to your unique circumstances.