Contributing to your superannuation before the financial year wraps up is one of the smartest financial moves you can make. Whether you’re a high-income earner looking to reduce your tax liability or a family aiming to boost retirement savings, getting your contributions in before the deadline can set you up for long-term success. Here’s everything you need to know to make the most of super contributions.
Why Make Super Contributions Before the End of the Financial Year
Making extra contributions to your superannuation before 30 June is more than just a way to prepare for the future. It’s also an opportunity to maximise short-term financial benefits. Here’s what you stand to gain:
- Tax Benefits: By adding to your super through concessional contributions (such as salary sacrifice or personal deductible contributions), you only pay 15 per cent tax on the added amount. However, if your income is $250,0000, you will be taxed an additional 15%. This is often lower than your marginal tax rate, meaning you can reduce your taxable income while also growing your retirement fund.
- Boost Retirement Savings: Making last-minute contributions can significantly increase your retirement nest egg thanks to the compounding effect. Every dollar you add today has the potential to grow exponentially over time.
- Smart Financial Planning: If you’re paying a higher marginal tax rate, contributing to super is a clever way to redirect potential tax payments into something that benefits you long-term. Families can also use partner contributions to reduce taxable income and build wealth together.
A Strategy for Every Circumstance
- Maximise Concessional Contributions for Tax Benefits : Concessional contributions (up to the cap of $30,000 per year) include salary sacrifice, employer contributions, and personal deductible contributions. High-income earners can slash their tax bill while supercharging their retirement funds by contributing up to this limit.
- Strategies for Families: Spouse contributions are a valuable tool for families looking to save. By contributing to your partner’s super account, not only do you boost their retirement savings, but you could also be eligible for a tax offset of up to $540 if their income is $37,000 or less.
Be Aware of Contribution Caps
Two main caps apply to super contributions:
- Concessional Contributions Cap: $30,000 per financial year.
- Non-Concessional Contributions Cap: $120,000 per financial year, or up to $360,000 over three years using the bring-forward rule.
Exceeding these caps can result in additional tax penalties, so plan your contributions carefully.
How to Make Contributions Before the Deadline
The clock is ticking to finalise your contributions before 30 June. Here’s how to get started:
- Know Your Limits: Check your balance and ensure your planned contributions don’t exceed the concessional or non-concessional limits for the year.
- Set Up Salary Sacrifice: If you’re not already doing so, speak with your employer about setting up a salary sacrifice agreement.
- Make a Personal Contribution: You can transfer funds directly to your super fund account. Be sure to lodge a Notice of Intent to Claim or Vary a Deduction for Personal Super Contributions form if you wish to claim a tax deduction.
- Consult a Financial Adviser: A professional can help you assess your specific situation and create a strategy to maximise your super contributions while staying compliant with the rules.
The Lasting Impact of Super Contributions
By planning your super contributions before the end of the financial year, you’re making a smart move towards tax savings, retirement security, and financial growth. It’s not just about getting a tax break today; it’s about building a brighter financial future for yourself and your loved ones.
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