Super contributions

Grow your nest egg

If you want to retire comfortably your employer's super contributions may not be enough to build your nest egg. By making extra contributions, you will boost the amount of super you have when you stop working. Start now so you can relax later.

Why grow your super?

There are lots of good reasons to grow your super:

  • You might live to be 100 so your money needs to last
  • The cost of living will increase over time
  • The age pension alone will not be enough for a comfortable lifestyle
  • Super gets special tax treatment
  • Low income earners may be eligible for bonus government contributions.

Before you start making extra super contributions, take a look at your finances as a whole. If you have high interest credit card debt or personal loans, it may be better to pay these debts off first. If you have a home loan, read our super vs mortgage webpage to help you work out whether contributing extra to super or paying down your mortgage is the better option for you.

Ways to boost your super

Your employer puts an amount equal to 9.5% of your salary into your super. Employers must pay this money into your super at least once a quarter, see employer contributions for more information.

Your employer contributions alone are unlikely to be enough to maintain your current lifestyle when you stop work but you can do your bit to grow your super.

Changes to super in 2017

Super contribution limits and tax concessions changed on 1 July 2017. Details of the changes are available on the Australian Tax Office (ATO) website.

Make concessional super contributions

If you are employed you and your employer can agree to pay a portion of your pre-tax salary as an extra contribution to super. This is commonly known as a salary sacrifice. It can be tax-effective if you earn more than $37,000 per year.

Concessional contributions are capped at $25,000 per financial year. This means the total of your employer and salary sacrificed contributions must not be more than $25,000 each year, see salary sacrifice super for more information.

Make non-concessional super contributions

Simply deposit your personal money into your super. These are called after-tax super contributions because you have already paid tax on the money. This is different from salary sacrificing, which happens before your income is taxed.

You cannot claim a tax deduction for contributions that you want to keep as non-concessional contributions. The cap for non-concessional contributions is $100,000 per financial year. If you are under age 65 you can bring forward up to 2 years non-concessional cap, allowing you to contribute up to $300,000 at a time, depending on your super balance.

Video: What happens if you go over the super contributions caps?

What happens if you go over the super contributions caps? video

Making extra contributions is an effective way to grow your super. But what happens if you go over the contribution caps? Watch this video from the ATO to find out.

Government co-contributions

If you earn less than $52,697 per year (before tax) and make after-tax super contributions, you are eligible for contributions from the government. This is called the government co-contribution.

If you earn less than $37,697 the maximum co-contribution is $500 based on 50c from the government for every $1 you contribute. The amount of the co-contribution reduces as your earnings increase.

To receive the co-contribution you will need to lodge a tax return for the year. The government will then work out how much you are entitled to. If you are eligible, the government will pay the co-contribution directly to your fund. See the ATO for more details on super co-contributions.

Low income superannuation tax offset

If you earn $37,000 or less you may also get a 'low income superannuation tax offset' 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.

You will get this payment whether or not you add extra money to your super. The ATO will automatically make these payments if you meet the criteria. Make sure your super fund has your tax file number so you don't miss out.

Case study: Ewan gets a low income super tax offset from the government

Young man

Ewan, 26, earns $36,000 a year from his job as a personal trainer. Over the last financial year Ewan's employer put $3,420 into his super account.

Because Ewan provided his tax file number to his super fund the ATO works out he is eligible for a low income super tax offset from the government. After Ewan lodges his tax return the government adds $500 to his super account.

Work out your best mix of super contributions

If you can afford to contribute more to your super, you'll want to know the best way to grow your nest egg.

Work out whether to make extra contributions before or after tax.

Super contributions optimiser

You can make sure you are receiving your super contributions by checking with your super fund or logging into your myGov account.

Super tax deductions

If you make personal after-tax super contributions you can claim them as a tax deduction, effectively making them concessional contributions. This system helps self-employed people or those with variable work patterns.

Spouse contribution splitting

You can also split your employer super contributions with your spouse. Contribution splitting can only be done after the end of a financial year. Your super fund will be able to guide you through the process. See the ATO's fact sheet on contributions splitting.

Case study: Lei builds her super

Part-time working mum at home with her babyLei, 40, is working part-time after taking some time off to have her three children. During the 10 years she was a full-time mum, no contributions were made to her super. Lei is worried that she won't have enough super when she retires.

After talking with her husband, they decide to take advantage of the spouse super-splitting rules. Each year Lei's husband will divide his employer's super contribution between his fund and Lei's. This will help her build her nest egg.

Spouse super contributions

If your spouse earns a low or no income, you may be able to claim a tax offset of up to $540 if you make contributions to your spouse's complying super fund.

Go to the Australian Taxation Office (ATO) for the rules on the superannuation spouse contribution tax offset.

Video: Splitting super with your spouse

Splitting super with your spouse video

Columnist and presenter Jane Caro explains how she and her husband split their super contributions, as part of ASIC's MoneySmart Women talk money video series.

First home super saver scheme

The first home super saver (FHSS) scheme allows first home buyers to save a home deposit within their super fund. From 1 July 2017 any personal voluntary contributions you make to your super can be withdrawn to help buy or build your first home.

Under the FHSS scheme, you can withdraw up to $15,000 of eligible contributions made over a financial year or up to $30,000 in total for all years, plus an amount that represents deemed earnings.

Voluntary contributions made to defined benefit super funds are not eligible for release under the FHSS scheme.

Withdrawals can be made from 1 July 2018. To be eligible to withdraw funds under the FHSS scheme you must:

  • not have owned property in Australia before
  • be at least 18 years old
  • not have withdrawn money under the scheme in the past.

Non-concessional contributions can be withdrawn tax free. Concessional contributions and total earnings will be taxed at marginal tax rates with a tax offset of 30%. You must enter into a contract to buy or build your first home within 12 months of making a withdrawal under the FHSS scheme or you will have to recontribute the amount back to super or pay additional tax on it.

For more information see the ATOs first home super saver scheme webpage. 

Downsize your home and put money into super

If you have owned your home for more than 10 years and are considering downsizing you will soon have another option for investing the excess proceeds from the sale of your home.

From 1 July 2018, if you are aged 65 or older you are able to contribute your downsizing proceeds from the sale of your principal residence to super as a non-concessional contribution. The contribution can be up to $300,000 per person and is in addition to any other voluntary contributions you make under existing contribution caps.

Making extra super contributions is a great way to boost your super savings and increase the likelihood of enjoying a happy and comfortable retirement.

Related links

Last updated: 22 Oct 2018