As we head towards the end of the financial year, the AMP technical super support team has seen an increase in the number of calls regarding how much people can contribute to super before reaching their concessional (before tax) and non-concessional (after tax) contributions caps.
Analysis of data from over 1800 calls revealed a focus on customers seeking to understand how they can make the most of the favourable tax conditions within super.
AMP Technical Strategy Manager John Perri said there are strict rules limiting how much people can contribute to super each financial year.
“In recent years, the amount people can save into super has been reduced. However, there are still options for people looking to maximise their contributions,” he said.
“Concessional super contributions allow consumers to contribute up to $25,000 per year of before tax income, through regular employer contributions and salary sacrificing."
"This income is then taxed at 15 per cent (or effectively 30 per cent if earning over $250,000) when it enters your super fund."
“Non-concessional super contributions are taken out of after-tax income."
"Each year, consumers can contribute up to $100,000 in non-concessional payments."
"This could be an effective strategy for those looking to boost their super balance or take advantage of the favourable investment tax conditions over time."
“As we approach 30 June, it is a good time to check your payslips, and speak with your superannuation provider, to determine how much of the concessional cap is left for this financial year."
“Keep an eye on this as we approach 30 June, and if you have the capacity to make additional concessional contributions, then under the current rules, you may be able to claim a tax deduction for them."
"You will need to supply your fund with some paperwork to claim the deduction (check in with your fund for the exact document)."
"If you are in a SMSF, then you can download from the ATO website a standard ‘notice of intent’ form to claim a tax deduction for personal super contributions”, said Mr Perri.
AMP advisers reported clients were also interested to understand what happens when you make excess super contributions to super above the caps.
“It is important to keep on top of your super contributions and make sure you stay below the various caps."
"Those who exceed them will not only end up with an additional tax bill they will be charged extra interest,” said Mr Perri.
Other things to consider before June 30:
- The benefits of making non-concessional contributions to qualify for the Government co-contribution (up to a $500 co-contribution where an individual earning less than $37,697 makes a $1,000 non-concessional contribution).
- For couples, the benefit of receiving a spouse contribution tax offset of up to $540, for non-concessional contributions made by one spouse on behalf of the other spouse who earns less than $37,000 pa.
About John Perri
John Perri is one of Australia’s foremost experts on superannuation, with over three decades experience navigating complex superannuation rules and regulations. As AMP’s leading technical super manager John helps break down complex super law into a language we can all understand. John’s aim is to educate Australians about the importance of engaging with their super to help build a better retirement.