Contributing to Super – Your Options

It’s important to contribute to super to build a nest egg for your retirement. Increasing life expectancy rates mean that the average Australian will now spend more than 20 years in retirement. You need to make sure that your money lasts as long as you do!

You have a number of options for contributing to your super, depending on your individual circumstances. Those options include:

the superannuation guarantee (if you’re an employee).
making additional concessional contributions.
making non-concessional contributions.
downsizing your home and putting the sales proceeds into super (if you’re aged over 65).
the low-income superannuation tax offset (LISTO).
government co-contributions.

We’ll now look at each of these options in turn.

Superannuation guarantee

If you’re an employee over the age of 18 and you earn more than $450 per month, your employer is legally obliged to contribute 9.5% of your ordinary time earnings into your super. The percentage is scheduled to increase over the next few years, as outlined in the table below.

Time period	Superannuation guarantee percentage
Up until 30 June, 2021	9.5%
1 July 2021 to 30 June 2022	10%
1 July 2022 to 30 June 2023	10.5%
1 July 2023 to 30 June 2024	11%
1 July 2024 to 30 June 2025	11.5%
After 1 July 2025	12%

Concessional contributions

Concessional (pre-tax) contributions to super are taxed at just 15% in Australia. This rate is lower than even the lowest marginal tax rate. You can make up to $25,000 worth of concessional contributions to your super in any one year. This is known as the concessional contributions cap. Your employer’s superannuation guarantee contribution counts towards your concessional contributions cap.

One way to increase your concessional contributions is by salary sacrificing. This is an arrangement you can make with your employer to have some of your salary diverted into super instead of receiving it. This not only boosts your super, it reduces the amount of income tax you need to pay.

Non-concessional contributions

Non-concessional (after-tax) contributions to super aren’t taxed at all in Australia. However, you can only make a maximum of $100,000 worth of non-concessional contributions in any one year. This limit is known as the non-concessional contributions cap.

Downsizing your home

If you’re aged over 65, have owned your residential home for more than 10 years and you sell it to downsize, you can contribute up to $300,000 worth of the proceeds into your super. This amount is classed as a non-concessional (i.e. tax-free) contribution, but it doesn’t count toward your non-concessional contribution cap.

Low-income superannuation tax offset (LISTO)

LISTO is a tax offset that that the government will pay into your super fund if:

your taxable income in a financial year is less than $37,000, and
you (or your employer) has made concessional contributions to your super in the corresponding financial year. The LISTO that you’ll receive will be 15% of your total concessional contributions for the year.

You don’t need to claim LISTO. The Australian Taxation Office will work out your eligibility for it when you submit your annual tax return.

Government co-contributions

The government will make a matching super co-contribution up to a maximum of $500 per year if you meet all of the following eligibility requirements:

you earn between $38,564 and $53,564,
you’ve contributed to your super fund during the financial year (and not claimed the amount as a tax deduction),
you’re aged less than 71,
10% of your income has come from employment or carrying on a business,
your total superannuation balance must be less than $1.6 million, and
you must not have exceeded your non-concessional contributions cap.

Like LISTO, you don’t need to claim a government co-contribution to super. The Australian Taxation Office will work out your eligibility for it when you submit your annual tax return.

How we can help

At Qi Wealth, our experienced, expert team of superannuation advisers can help you to build your retirement nest egg. We can also help you if you want to set up your own SMSF. We’ll take the time to understand your individual circumstances so that we can provide you with the best possible advice. We develop long-term, trusted relationships with our clients.