Super Contributions – 4 Ways to Boost Your Balance

As Australians navigate the complexities of retirement planning, there are a number of ways to boost your retirement income and enjoy the lifestyle you envisage for yourself. Superannuation is one of the most important assets for retirement, offering tax advantages and the potential for growth over time, but for many, the challenge lies in identifying the most effective ways to proactively increase their super balance. We’ve outlined below 4 super-boosting strategies you might consider, namely concessional and non-concessional contributions, government incentives, and spouse contributions. Each method offers unique benefits and should be tailored to different financial situations and objectives. Let’s have a look.

Concessional/Salary Sacrifice (Pre-Tax) Superannuation Contributions

Concessional or salary sacrifice superannuation contributions present a significant opportunity for individuals to boost their retirement savings in a tax-efficient manner. By opting for a salary-sacrifice arrangement with your employer, you can allocate a portion of your pre-tax salary directly into your superannuation account. This method not only allows for potential tax savings but also facilitates the growth of your retirement funds through compounding interest over time. The tax rate within superannuation for these concessional contributions is capped at 15%, which is considerably lower than the marginal tax rates for most individuals, which can go as high as 47%. As a result, by diverting part of your pre-tax income to your super, you may achieve a tax saving of up to 32%, depending on your marginal tax rate. This difference can significantly enhance the amount accumulating in your superannuation fund, providing a more substantial financial foundation for the lifestyle you want to lead in your retirement years. What’s more, the concessional contributions cap (the maximum in before-tax contributions you can add to your super each year without paying extra tax), is increasing from $27,500 to $30,000 on 1 July 2024.

Non-Concessional (After-Tax) Superannuation Contributions

Non-concessional (after-tax) superannuation contributions offer another opportunity to enhance your retirement savings. Since the income from superannuation is tax-free upon reaching retirement age, channelling additional funds into your super account can be a wise decision. By making contributions with after-tax income, you avoid the contributions cap that applies to pre-tax contributions and face no tax penalty upon entry to your super fund. This means that every dollar contributed in this manner goes directly into your super balance, untouched by further taxation. Our Workplace Financial Advice (WFA) team specialises in helping employees navigate the intricacies of these contributions – with our assistance you can maximise the potential benefits and effectively increase your retirement savings. With the strategic management of non-concessional contributions, you can significantly bolster your super balance, leveraging the tax-efficient environment of superannuation to prepare for a financially secure retirement. As with the concessional contributions cap, the non-concessional cap will also increase upon the turn of the new financial year. The non-concessional cap is exactly four times the amount of the concessional cap, so will increase from $110,000 to $120,000 on 1 July.

Government Co-Contributions

The government co-contribution scheme is designed to aid lower-income earners in growing their superannuation funds. By making personal after-tax contributions to their super, eligible individuals can receive a matching contribution from the government, up to a maximum of $500 (as of March 2024). This initiative aims to incentivise savings for retirement among those who might not have ample opportunity to do so due to their income levels.

Spouse Splitting

Spouse splitting represents a strategic financial planning opportunity that allows for the redistribution of superannuation contributions between spouses. This can be particularly advantageous in balancing the superannuation accounts between partners, potentially leading to tax benefits and better financial planning outcomes in the future. By transferring up to 85% of your concessional contributions (employer and salary sacrificed contributions) from the previous financial year to your spouse’s superannuation account, you can assist in equalising your super balances. This strategy may offer several advantages, including optimising the use of the low-rate cap for superannuation lump sum withdrawals and potentially reducing the total tax payable on superannuation benefits in retirement. Our team is prepared to guide you through the process, from assessing the benefits of spouse splitting in your specific situation to handling the necessary documentation and procedures to implement this strategy effectively. Through spouse splitting, couples can achieve a more balanced and tax-efficient approach to building their retirement savings, ultimately leading to enhanced financial security in their retirement years.

Workplace Financial Advice (WFA) Services

Lifestyle Financial Services (a division of Priority Advisory Group) have been assisting business for a number of years in educating and supporting their employees to make the most out of their financial situation. If your business has engaged our WFA team, there are a number of benefits, education programs, and more, that you will have access to. To find out more about what’s available, click here.

Priority Advisory Group advise clients across a range of different circumstances and stages of life, to help them achieve their lifestyle aspirations. This means that even if our Workplace Financial Advice (WFA) services aren’t right for you, our Personal & Family Wealth, Life Risk Insurance, and Aged Care advice teams are ready to help you develop your own unique financial plan today. To find out more about how we can assist, contact us today via our website or on 1300 349 188.

Please note the information provided within this article is general of nature and is not a personal advice recommendation. Prior to considering strategies discussed in this article we recommend you seek personal financial advice. Please be aware that, without the benefit of financial advice, you may be committing yourself to financial strategies or products that are not appropriate for your overall personal situation, needs and objectives.

Further reading: Understanding concessional and non-concessional contributions | Australian Taxation Office (ato.gov.au)

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