Making Extra Contributions To Your Super Has Rewards
The best time to start tipping any extra money you can afford into super is today. Whether your retirement is just around the corner or a long way down the track, the tax benefits and compound earnings potential could give your retirement nest egg a significant boost.
For many people, being in a position where you’re relying on the government’s Age Pension won’t be enough to support the lifestyle you were hoping for in retirement. We’re also living longer, and the cost of living will continue to increase.
The potential benefits of making extra contributions will vary depending on your personal circumstances, including your income, the type of contributions you make, and the investment returns from your fund. You should also look at your finances as a whole, as credit card debt, personal loans or a home loan could still be a priority over extra super contributions.
Ways to boost your super
You can make additional contributions from your before or after-tax income.
The before-tax contributions you can make are also known as ‘salary sacrifice’. This is when you choose to have your employer pay some of your salary into super instead of taking the money as after-tax pay. As an employee in Australia, the main benefit here is that these contributions are taxed at 15%, which could be lower than your marginal tax rate. You should talk to your employer about whether salary sacrifice is available to you and how to start.
As an example, if you earn $90,000 and decide to salary sacrifice $5,000 to super, your overall tax would go from $22,732 to $21,622 – a saving of $1,110 in just one year.
Personal contributions that you or your spouse makes on your behalf to super from after-tax salary are known as non-concessional contributions. There are limits on the amount you can contribute each year through this method.
If you don’t have an employer or your employer doesn’t offer salary sacrifice, you can still make tax deductible personal contributions.
You can generally claim up to 100% of any personal contributions you have made throughout the year as a deduction on your tax return – as again, these deductible super contributions are only taxed at 15% instead of your marginal tax rate.
Making extra contributions
Simply talk to your employer about making contributions through your payroll or download a Personal Contribution Notice form – you can also access a number of calculators from our website to help you work out your potential retirement amount, or the impact additional contributions may have.
You can always contact the Nationwide Super team if you need any help, or we can put you in touch with a Super Adviser^, who will explain the different ways you can contribute to super and help you choose the right options for your particular circumstances.