The Top 8 Ways to Contribute to Your Super

Do you get confused with what you can contribute to your super fund? I thought this month that I would de-mystefy what you can put in or contribute and how it treated from a tax perspective. The rules are the same as for a retail or industry super fund with the exception being in-specie contributions and I’ll explain what these are. There are limits on the amount that can be contributed into a super fund as well as.

At the present time, the following types of contributions are allowable:

Generally, if you work for someone, are over 18 and you earn more than $450 a month (before tax), your employer has to pay a certain percentage of your salary in the form of superannuation. These are known as mandatory contributions or super guarantee contributions. For the 2014-15 financial year, this is 9.5% of your salary or wages. This will stay the same until 30 June 2018 and then it will increase by .5% until it reaches 12%
You, as an employee, can also choose to have part of your salary paid into superannuation and this is referred to as salary sacrificing.
If you are self-employed, you are not required to contribute to a super fund. However, if you do, these are classed as self-employed contributions.
You can contribute additional amounts into superannuation and these are called personal contributions.
If you are classified as a low income earner and you make personal contributions into superannuation, then the government will match or co-contribute up to $500 of the contribution you have made. These are referred to as government co-contributions.
Your spouse can contribute into your super fund. These are given the obvious name of spouse contributions. There are tax advantages in doing this, as your spouse can claim a tax rebate for the contributions made
Contributions other than cash can be made e.g shares. These are called in-specie contributions. In general these are not accepted by retail or industry super funds
Rollovers or transfers in are amounts moved from other super funds

For mandatory or super guarantee contributions, salary sacrifice and self-employed contributions (points 1-3 above), a tax deduction for those payments will have been claimed by either your employer in their tax return (mandatory or super guarantee contributions) or you in your tax return (self-employed contributions). These are called concessional contributions.

In relation to personal contributions (point 4 above) you may or may not have claimed a tax deduction. If a tax deduction has or will be claimed, then this contribution will also be classified as a concessional contribution.

For the rest, a tax deduction won’t have been claimed and these are known as non-concessional contributions.

Why is whether a tax deduction has been claimed important? It’s important because that will dictate how the contribution will be taxed in your super fund. If a tax deduction has been claimed before it is paid into your super fund, in the case of concessional contributions, then tax has to be paid by your superfund on those contributions which at present is 15%. If a tax deduction has not been claimed, in the case of non-concessional contributions, then tax will not be paid by your super fund on those contributions.

There are limits on the amount of each type of contribution that can be made. This will be affected by how old you are and whether you are classified as still working, so there is not one rule for everyone.

The limits are known as contribution caps. To give you an idea regarding the maximum amounts the caps allow, the following are the rules for the 2014-15 financial year:

Concessional contributions – if you are under 50, the maximum for concessional contributions is $30,000 per year. For those aged 50 and over, it is $35,000.
Non-concessional contributions – if you are under 65, the maximum for these contributions is $180,000 a year, or $540,000 over a three year period. The general rule, at the moment, is that non-concessional contributions can be up to six times the amount of concessional contributions that can be contributed. You can pay the entire $540,000 in one year, but will not be able to contribute any more over the following two years. If you are over 65 and less than 75, you have to satisfy the work test. You must be employed for a minimum of 40 hours over 30 consecutive days during the financial year. The maximum is also $180,000 a year, but you can’t pay the three years’ worth ($540,000) in one year.
If you are over 75, only the mandatory or super guarantee contributions can be accepted by the super fund.

The contribution caps relating to each of the age groups seem to change each year, so the above is not set in stone. It only relates to the 2014-15 financial year. I’ve included it as a general indication of what can be contributed into a super fund and to demonstrate that there are ceilings on what can be contributed. If you Google “contribution caps,” one of the links you will generate will lead to the ATO website. They will have a table of each of the different contribution caps, relevant age brackets and maximum amounts. If you do that at the start of each financial year, you will be up to date with the current amounts and applicable age brackets.

You need to be careful that you don’t exceed whatever the contribution caps are as:

For concessional contributions the excess amount will automatically be included in your assessable income and be taxed at your marginal rate of tax less the 15% tax that will be paid by your super fund on these contributions; and
For non-concessional contributions, they are taxed at the top marginal rate of tax which is 49%. The government has recently legislated that, for excess contributions after 1 July 2013, excess amounts plus 85% of the related earnings can paid back to you. 15% of the related earnings remain in the super fund to pay the tax on these earnings. You will be taxed at your marginal rate of tax less the 15% tax paid by your super fund.

Audrey Dawson is Director of Super Confidence and author of “Holy Crap!
Where’s My Super Gone?! Self-Managed Super Made Simple.”