More super – less tax

The end of the financial year is fast approaching and there’s a great way to help you save on tax while boosting your super.

Happy woman. More super – less tax. UGC
More super – less tax

By making an after-tax contribution to your superannuation before the end of the financial year, you could boost your retirement savings for the future – and may be able to claim a tax deduction now.1

Here’s what you need to know:

Benefit today – and tomorrow

If you make super contributions from your after-tax income or savings, you may be able to claim a personal tax deduction and reduce your taxable income, while boosting your super. The contribution is taxed in your super fund, generally at the concessional rate of up to 15% (or up to 30% for higher income earners). This strategy compares favourably to paying tax at your marginal tax rate which could be up to 47% (including the Medicare levy).

Depending on your circumstances, this strategy could result in a tax saving of up to 32% – and help you retire with more.

Here’s an example:

Bob is 55 years of age and earns $80,000 pa, so his marginal tax rate is 34.5% (including the Medicare levy). He’s paid off his mortgage and plans to retire in 10 years – so he wants to contribute more to his super.

He makes a personal super contribution of $10,000 and claims the amount as a tax deduction – reducing his taxable income. This means he pays $3,450 less tax in his tax return. Meanwhile, tax of 15% ($1,500) is deducted from the contribution in the fund.

By using this strategy, Bob increases his super balance and makes a net tax saving of $1,950 (that is, $3,450 less the $1,500 tax he paid within his super fund).

Am I eligible?

You can make a personal deductible contribution to super up to age 66 regardless of your working status. However, from 67 to 74 you generally need to have worked at least 40 hours over 30 consecutive days in the financial year to claim a tax deduction for personal super contributions. You may be exempt from this ‘work test’ if you met it in the previous financial year and your total super balance was less than $300,000 on the previous 30 June.

How do I claim my deduction?

To claim the super contribution as a tax deduction, you need to submit a valid ‘Notice of Intent’ form to your super fund, and receive an acknowledgement from them, before you complete your tax return, start a pension or withdraw or rollover the money.

How much can I contribute?

Personal super contributions claimed as a tax deduction count towards your concessional contribution cap, which is $27,500 in the 2022/23 financial year. However, you may be able to contribute more than this if you didn’t fully use up your concessional cap since 1 July 2018 by making some additional ‘catch-up’ contributions1. Your total super balance must be below $500,000 on the previous 30 June to use ‘catch-up’ amounts. But make sure you don’t contribute more than you are allowed, as penalties may apply. Also, keep in mind that all employer contributions (including superannuation guarantee and salary sacrifice) and certain other amounts are counted towards this cap.

The ATO keeps a record of contributions made which you can view via your myGov account which may also assist in helping you understand your ability to utilise catch-up contributions.

Need advice?

If you’re thinking about adding to your super, we can help you decide whether making contributions as well as claiming a personal tax deduction is right for you. We can also help you assess all your options that may help build a healthy retirement nest-egg. CLICK HERE to contact us now.

¹ Eligibility conditions apply. For more information, visit the ATO website at ato.gov.au.


Important information and disclaimer
This document has been prepared by Actuate Alliance Services Pty (ABN 40 083 233 925, AFSL 240959) (Actuate), a related entity of Insignia Financial Ltd ABN 49 100 103 722.

The information in this document is factual in nature. It reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue (27 March 2023), and may be subject to change. In some cases, the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Examples are illustrative only and are subject to the assumptions and qualifications
disclosed. Past performance is not a reliable indicator of future performance, and it should not be relied on for any investment recommendation. To the extent that the information in the document contains general advice, it has been prepared without considering any person’s individual objectives, financial situation or needs. You should consider the appropriateness of the general advice in light of your own objectives, financial situation or needs. This document is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of Actuate. Whilst care has been taken in preparing the content, no liability is accepted by Actuate or any member of the Insignia Financial group, nor their agents or employees for any errors or omissions in this document, and/or losses or liabilities arising from any reliance on this document.

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