What you need to know about super contributions

With 30 June fast approaching, you’re running out of time to top up your super this financial year, build your nest egg and potentially claim a tax break.

Here’s what you need to know.

What’s the difference between concessional and non-concessional contributions?

On top of the 10.5% your employer pays into your super fund (this increases to 11% from 1 July 2023), individuals also have the option to build their balances faster themselves by making personal contributions.

These personal contributions are classified as either concessional or non-concessional depending on their tax treatment.

Concessional contributions are money that is put inside a super fund before tax is paid on it. Salary sacrificing, where you voluntarily put a greater percentage of your wage into super before you are taxed, is one example.

On the other hand, a non-concessional contribution is when you put in money that you have already paid tax on, for example out of your own savings.

Are there tax advantages to making additional contributions?

As the name implies, concessional contributions are concessionally taxed, and are generally taxed at 15%.

Outside of super, every dollar of income earned over $45,000 by an individual who is an Australian resident is taxed at a rate of 32.5% or more. That’s a difference of 17.5%. This means that concessional contributions can be used to lower an individual’s tax liability.

But what about non-concessional contributions? While you’ve already paid tax on that money by definition, you would still pay more tax on any capital gains. Outside of super that will be at your marginal tax rate, while in super that will still potentially be lower, with earnings generally taxed at 15%.

The trade-off is that Australians usually can’t access this money until they reach retirement age, which may be decades away for some.

What are the caps on personal contributions?

While there can be tax advantages to making personal contributions, there are also strict limits on how much you can contribute each year.

Under the current caps, Australians can make $27,500 in concessional (pre-tax) contributions every financial year and $110,000 in non-concessional (after-tax) contributions per year.

You may also be able to contribute more for each under carry forward arrangements. You can familiarise yourself with the conditions of doing so for concessional and non-concessional contributions on the ATO website.

What is the deadline for personal contributions?

If you’re looking to make a personal super contribution this financial year, you only have until 30 June to make it. Please note that if you want to make a personal contribution via BPAY, you should allow up to 5 business days for BPAY contributions to transfer to your Superhero Super bank account.

If you plan to claim a tax deduction for it, you’ll also have to fill out and submit a notice of intent to claim form and send it to us at hello@superhero.com.au (not the ATO). You can find the form on the ATO’s website. You should read the form carefully to check for eligibility requirements and cut-off times for lodging.

Once you have submitted your form, you will need to wait for confirmation from Superhero that your notice is valid before you can make your contribution.

When do I claim my tax deduction?

When you fill out your tax return, you can then list the amount you’re eligible to claim that financial year.

Want to learn more?

For more information on how to make a claim, check out the notice of intent section on the ATO’s website.