Making the most of super this month...

Six Ways to Boost Your Superannuation Contributions…

The start of the 2024-25 financial year on 1 July brought significant changes aimed at helping Australians maximize their superannuation savings. These updates included increases to the statutory limits on contributions, offering new opportunities to grow your retirement fund.

The concessional (pre-tax) contribution cap has increased from $27,500 to $30,000, and the non-concessional (after-tax) contribution limit has risen from $110,000 to $120,000 annually.

As we approach the halfway mark of this financial year, it’s worth evaluating whether you’re taking full advantage of these changes. With December marking “super hump month,” now is the perfect time to adjust your strategy to secure potential tax benefits and grow your super balance.

Here are six strategies to help you get more into your super before the end of this financial year.

1. Set Up a Salary Sacrifice Plan

One of the simplest ways to boost your super is to arrange a salary sacrifice plan with your employer. By directing a portion of your pre-tax salary into your super account, you not only grow your retirement savings but may also reduce your taxable income.

Key considerations:

  • Contributions are taxed at 15%, typically lower than most personal income tax rates.

  • Regular, small contributions can compound significantly over time.

  • Be mindful of the $30,000 annual concessional contributions cap, which includes employer Superannuation Guarantee payments. Exceeding this limit may result in tax penalties.

2. Make After-Tax Contributions with a Tax Deduction

Alternatively, you can deposit after-tax money directly into your super and potentially claim a tax deduction in your next tax return. To do this, you’ll need to:

  • Notify your super fund using an ATO form and receive an acknowledgment before lodging your 2024-25 tax return.

  • Remember that these contributions are taxed at 15%, and the annual concessional cap still applies.

This strategy can be especially useful for those who prefer flexibility over a structured salary sacrifice arrangement.

3. Use Unused Concessional Contributions from Previous Years

If your super contributions have fallen short of the cap in previous years, you may be eligible to carry forward unused concessional contributions from the past five financial years.

Eligibility requirements:

  • You must have a total super balance below $500,000 as of 30 June of the previous financial year.

  • Contributions exceeding the annual cap must be made within the same financial year.

Log into the myGov platform to track and manage your concessional contributions.

4. Contribute Extra Funds from Windfalls or Asset Sales

If you’re expecting extra income—perhaps from the sale of property or other assets—consider directing some proceeds as after-tax (non-concessional) contributions to your super.

Key points:

  • The annual non-concessional contribution limit is $120,000.

  • The three-year bring-forward rule allows you to contribute up to $360,000 in one financial year, provided you don’t exceed limits over the subsequent two years.

  • This strategy can be particularly effective for those nearing retirement who want to maximize their super balance.

5. Leverage Downsizer Contributions

If you’re aged 55 or older and selling your principal residence, you can contribute up to $300,000 per individual (or $600,000 per couple) into your super fund.

Advantages of downsizer contributions:

  • They do not count towards annual contribution caps.

  • Funds form part of the tax-free component within your super.

Check the ATO website for specific eligibility criteria and conditions, or consult a financial adviser for tailored advice.

6. Split Contributions with Your Spouse

Couples can optimize their super balances by splitting up to 85% of concessional contributions each financial year.

Conditions for super splitting:

  • Your spouse must be under preservation age (60 years) or aged 60-65 and not retired.

  • Confirm that your super fund allows contribution splitting.

This strategy can be advantageous for couples seeking to balance retirement savings or optimize tax efficiency.

Consider Professional Advice…

Superannuation and retirement planning can be complex, with numerous contribution types, caps, and age-based restrictions. Exceeding contribution limits can result in significant tax penalties.

If you’re unsure about your options, seek guidance from a licensed financial adviser who can provide personalized advice tailored to your financial situation.

By implementing these strategies and staying informed, you can take full advantage of the opportunities to grow your super and build a more secure financial future.

Rick Maggi CFP, Perth Financial Advisor, Westmount Financial

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Disclaimer
This document has been carefully prepared by Westmount Securities Pty Ltd (ABN 42 090 595 289, AFSL 225715) for general information purposes only. However, neither Westmount Securities Pty Ltd nor any of its affiliates guarantee the accuracy or completeness of any statements contained herein, including any forecasts. It is important to note that past performance is not a reliable indicator of future outcomes. This material does not consider the specific objectives, financial circumstances, or needs of any particular investor. Therefore, before making any investment decisions, investors should assess the relevance of this information to their individual situation and consult professional advice, taking into account their unique objectives, financial position, and needs.