The countdown to the end of the financial year (EOFY) is on, and for Australians, it’s the perfect time to evaluate your superannuation strategies. Whether you’re a young family looking to secure your financial future or a high-income earner aiming to make the most of your tax benefits, understanding concessional and non-concessional contributions is key. Here’s how you can maximise your superannuation savings before 30 June.
What Are Concessional Contributions?
Concessional contributions refer to pre-tax contributions to your superannuation fund. This includes contributions made by your employer (such as the super guarantee) and any salary-sacrificed contributions or personal contributions for which you claim a tax deduction.
Benefits of Concessional Contributions
- Tax Advantages: Contributions are generally taxed at just 15%, which is often lower than your marginal tax rate, making it a tax-efficient way to grow your super. If you earn $250,000 or above your concessional contributions are taxed at 30% – still a significant saving compared to your marginal tax rate.
- Boosted Retirement Savings: Over time, the power of compounding can significantly enhance your retirement nest egg.
Carry Forward (Catch-up) Contributions:
The concessional contributions cap is $30,000 per financial year. If you’ve unused concessional cap amounts from up to five previous years, you might be eligible to carry forward your entitlements and contribute more in the current year. This is particularly beneficial for high-income earners looking to reduce their tax liability while growing their super.
Understanding Non-Concessional Contributions
Non-concessional contributions refer to after-tax contributions to your super fund. These contributions are made from your income or savings on which tax has already been paid.
Key Eligibility Criteria
- Contribution Cap: For the 2024-2025 financial year, the annual non-concessional contributions cap is $120,000.
- Bring-Forward Rule: If you’re under 75, you may bring forward up to three years’ worth of non-concessional contributions (up to $360,000), provided your total superannuation balance is below $1.66 million.
Benefits of Non-Concessional Contributions
- These contributions are not taxed upon entering your superannuation fund, as they are made from after-tax income.
- They represent an effective strategy for young families and low- or middle-income earners to amplify their retirement savings.
Strategies for Young Families
For young families, superannuation might not always feel like a priority. However, by adopting a few simple strategies, you can build a solid foundation for financial security down the track.
- Co-Contributions: If your income is below $60,400, you may qualify for a government co-contribution when you make an after-tax contribution to your super.
- Spouse Contributions: Contributing to your spouse’s super can result in a tax offset of up to $540 and also help boost their retirement savings.
- Small, Regular Contributions: Making small, regular non-concessional contributions can add up significantly over time and provide more flexibility as your circumstances change.
Tips for High-Income Earners
High-income earners have unique opportunities to maximise benefits before EOFY, but they also need to stay cautious of contribution caps. ccc
- Salary Sacrifice: Review your salary-sacrifice arrangements to ensure you are maximising concessional contributions without breaching the $30,000 cap.
- Catch-Up Contributions: If eligible, take advantage of unused concessional cap amounts from the past five years to boost your contributions.
- Tax Deductible Contributions: Consider making personal tax-deductible contributions to reduce your taxable income while growing your superannuation.
Plan Ahead and Seek Expert Advice
When it comes to superannuation, the decisions you make now can significantly impact your financial future. It’s essential to review your contributions well before EOFY to avoid missing out on opportunities.
Seeking guidance from a trusted financial adviser or superannuation expert can ensure you’re making the most of concessional and non-concessional contributions while staying within the rules. They can help you map out strategies tailored to your individual circumstances, whether you’re a young family just starting out or a high-income earner optimising every tax-saving opportunity.
Take Action Before June 30
Don’t wait until the last moment to prepare your superannuation strategy. EOFY is fast approaching, and the sooner you start planning, the better positioned you’ll be to take full advantage of concessional and non-concessional contributions.
By understanding your options and implementing these strategies, you’ll not only enjoy potential tax benefits but also secure a more comfortable retirement for you and your family.
If you would like to improve your current investment strategies or are looking to start your investment journey, click here to organise a complimentary 20-minute phone call with an EPG Wealth adviser.