The ins and outs of additional personal super contributions
Your super is a long-term investment – additional contributions you make today can have a significant impact on your balance and retirement.
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 personal contributions to your super, you can take a key step to helping ensure a comfortable retirement.
Types of additional personal contributions
Although your employer makes contributions on your behalf, you’re also able to make additional personal 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. For further information on the contribution caps, see our dedicated webpage.
Non-concessional contributions
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 $120,000 of contributions each financial year (or up to $360,000 by using the ‘bring-forward’ rule).
If you take advantage of these rules, you're 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
Concessional contributions are added to your super before-tax, such as employer and salary sacrifice contributions. Additionally, any after-tax contributions which you have claimed a tax-deduction on are considered to be a concessional contribution.
You are generally able to make up to $30,000 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 to your super 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 (if you’re eligible). These contributions will then count towards your concessional contribution cap.
You can do this by first making non-concessional contributions to your super and then submitting a ‘notice of intent to claim’ form to us. We will then convert the requested non-concessional contributions to concessional contribution.
As concessional contributions are taxed at a low-rate of 15%1 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.
Getting started
Although these are some of the additional contributions you can make to your super, there are others. For further information on the other types of contributions you can make see our dedicated webpage.
Before making additional contributions to your super you may wish to seek financial advice. Our Helpline Advice team can provide limited financial advice about your super fund at no additional cost. You can make an appointment with this team by calling our Helpline on 1800 682 525, 8am-7pm (AEST/AEDT).
Key highlights:
- Your super is a long-term investment – additional contributions you make today can have a significant impact on your balance and retirement outcomes in the future.
- 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.
- You may be eligible to claim a tax deduction by making personal (i.e. after-tax) contributions to your super and then submitting a ‘notice of intent to claim’ form to us.
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Prior to making additional contributions to your super, please be aware that there are caps on how much you can contribute each financial year. If you exceed these caps there may be tax implications. You can find further information regarding the contribution caps here.
1 If the total of your combined income and concessional contributions is more than $250,000 per financial year, any concessional contributions over this threshold will be taxed at 30%. This extra 15% tax is often referred to as 'Division 293 Tax'. Find out more by visiting the ATO’s website or by seeking your own tax advice.
Disclaimer: Issued by Mercer Superannuation (Australia) Limited ABN 79 004 717 533, Australian Financial Services Licence # 235906, the trustee of the Mercer Super Trust ABN 19 905 422 981 ('Mercer Super'). Any advice provided is of a general nature and does not take into account your objectives, financial situation or needs. Before acting on any advice, please consider the Product Disclosure Statement available at mercersuper.com.au. The product Target Market Determination can be found at mercersuper.com.au/tmd.
The material contained in this document is based on information received in good faith from sources within the market and on our understanding of legislation which we believe to be accurate. Neither Mercer nor any of its related parties accepts any responsibility for any inaccuracy.
This information is based on the interpretation of current tax laws which may change. You should obtain your own tax advice.
Mercer financial advisers are authorised representatives of Mercer Financial Advice (Australia) Pty Ltd ABN 76 153 168 293, Australian Financial Services Licence #411766. The value of an investment in the Mercer Super Trust may rise and fall from time to time.
The investment performance, earnings or return of capital invested are not guaranteed. Past performance is not a reliable indicator of future performance. 'MERCER’ is an Australian registered trademark of Mercer (Australia) Pty Ltd ABN 32 005 315 917.