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Understanding personal super contributions

Your super is a long-term investment – contributions you make today can have an impact on your balance and retirement outcomes.

Although super is considered to be a long-term investment, we know the reality is that many people don’t really start to think about their super until they get closer to retirement, which can lead to having a lower than ideal balance when you finish working.

By making additional contributions to your super, you can take a key step to helping ensure a comfortable retirement.

Types of additional personal super contributions

Although your employer makes contributions on your behalf, you’re also able to make additional contributions to help boost your super balance. Contributions big or small, one-off, or consistent, can all play a significant role in helping to bolster your balance.

Through the power of investment returns and compounding interest, additional returns can be generated on the returns you’ve already earned, helping to exponentially grow your super balance over the years.

Contributions are typically classed as either ‘non-concessional’ or ‘concessional’, both of which have rules, known as contribution caps that outline how much you can contribute within a financial year.

  • Example: Laura enjoys the benefit of after tax contributions

    Laura is 42 years old with a super balance of $200,000 and currently earns $160,000 per year. She has recently sold an investment property and decides she’d like to contribute part of that money to her super account. As such, she contributes $110,000 as a voluntary non-concessional contribution.

    As a result of this one-off contribution, when Laura reaches age 65 and is ready to retire her approximate balance would be $1,116,030, whereas if she had not made the one-off contribution, her balance would be approximately $902,280, which is a difference of $213,750.1


Non-concessional contributions (after tax)

Non-concessional contributions are typically made with your after-tax money, such as funds in your savings account and are not subject to any tax when added to your super account.

You can generally make up to $110,000 of contributions each financial year (or up to $330,000 by using the ‘bring-forward’ rule if eligible.

If you take advantage of these rules, you are able to invest a significant amount of additional funds, allowing you to considerably grow your balance over the years.

Non-concessional contributions and the returns they generate can generally be made without tax implications, as once you reach age 60, any withdrawals from your super account are tax-free.

Concessional contributions (before tax)

Concessional contributions are money that are added to your super before-tax, such as employer and salary sacrifice contributions.

You are generally able to make up to $27,500 of concessional contributions each financial year, without any tax implications. However, you may be able to make over this amount if you’re eligible to use the ‘carry forward rule’.

Contributing and getting a tax deduction

Another method of contributing to your super that has the added benefit of allowing you to claim a tax deduction, is the converting of non-concessional contributions to concessional contributions.

You can do this by first making non-concessional contributions to your super and then submitting a ‘Notice of intent to claim or vary a deduction for personal super contributions’ form to us, which allows us to convert some or all of your non-concessional contributions to a concessional contribution.

As concessional contributions are taxed at a low-rate of 15% (or 30% if your taxable income is over $250,000) you can then claim these contributions as a tax deduction when you file your tax return.

The difference your contributions can make

Our Retirement Income Simulator, can help you understand what your retirement income could look like, how long it might last and how adding even a little extra can have a significant impact over the long-term.

Before making additional contributions to your super you may wish to seek financial advice. Our Helpline team can provide financial advice about your super fund at no additional cost. This team is available 8am - 7pm, Monday – Friday (AEST/AEDT) on 1800 682 525.

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  • Example: Tony adds more to his retirement plans before tax

    Tony is 40 years old with a super balance of $170,000 and currently earns $150,000 per year. As his employer already contributes $15,000 per year to his super on his behalf, Tony intends to maximise his usage of the concessional contribution cap by contributing an additional $12,500, to reach a total of $27,500 per year, as well as claiming these additional contributions as a tax deduction.

    To do this Tony contributes approximately $480 from his take home pay to his super account as a non-concessional contribution each fortnight. Prior to lodging his tax return at the beginning of each financial year, he submits a Notice of intent to claim or vary a deduction for personal super contributions’ form to his super fund, which converts the $12,500 of his non-concessional contributions from the previous financial year to concessional contributions, allowing him to claim them as a tax deduction.

    In addition to being able to claim a tax deduction each year, by the time Tony reaches age of 65 and is ready to retire, his approximate balance would be $1,251,227, whereas if he had not made these additional contributions over the years, his balance would be approximately $893,186.

    As a result of making voluntary concessional contributions over the years, coupled with investment returns and compound interest, his balance is $358,041 greater at retirement.2

Disclaimer: 1. This example was prepared using Mercer’s Retirement Income Simulator for a 42 year old female with a $200,000 super balance, a $160,000 per year salary and an intended retirement age of 65. This calculator uses default assumptions about future investment returns and inflation, which are considered reasonable at the current date based on long-term economic modelling (by Mercer Investment Consulting). The results provided are in today's dollar value which have been calculated by deflating the projected dollar amounts based on the assumed rate of wage inflation as described on the Assumptions panel within the Mercer Retirement Income Simulator.

2. This example was prepared using Mercer’s Retirement Income Simulator for a 40 year old male with a $170,000 super balance, a $150,000 per year salary and an intended retirement age of 65. This calculator uses default assumptions about future investment returns and inflation, which are considered reasonable at the current date based on long-term economic modelling (by Mercer Investment Consulting). The results provided are in today's dollar value which have been calculated by deflating the projected dollar amounts based on the assumed rate of wage inflation as described on the Assumptions panel within the Mercer Retirement Income Simulator.

This document has been prepared on behalf of Mercer Superannuation (Australia) Limited (‘Mercer Super’), ABN 79 004 717 533, Australian Financial Services Licence #235906, the trustee of the Mercer Super Trust ABN 19 905 422 981. Any advice contained in this document is of a general nature only, and does not take into account the personal needs and circumstances of any particular individual. Prior to acting on any information contained in this document, you need to take into account your own financial circumstances. Please consider the Product Disclosure Statement, Product Guide, Insurance Guide, and Financial Services Guide before making a decision about the product, or seek professional advice from a licensed, or appropriately authorised financial adviser if you are unsure of what action to take. 'MERCER' is a registered trademark of Mercer (Australia) Pty Ltd ABN 32 005 315 917. Copyright 2022 Mercer LLC. All rights reserved.