End of financial year contributions

The end of the 2017/18 financial year (EOFY) is approaching fast, so now might be a good time to make the most out of your super before 30 June.

Making additional contributions could help give your super balance a boost, and there are potential tax benefits as well.

It’s important to review your super before 30 June 2018 because new thresholds and other guidelines begin on 1 July 2017. The good news is that even with less than a month to go before EOFY, you still have time.

Here are four tips and benefits to consider.

1. Reduce your taxable income with salary sacrifice

Making voluntary before-tax super contributions (called concessional contributions) can be a great way to boost your retirement savings and maybe even reduce the amount of tax you pay. These contributions are also known as salary sacrifice contributions.

How do you do this? Speak to your employer about making before-tax contributions from your salary. They need to make your contribution soon so that it’s allocated to your super account before EOFY.

What benefits are there? Thanks to the power of compound interest, if you pay small, regular amounts of extra money into your super now, you'll have much more extra money when you retire. Also, before-tax contributions may be taxed at a lower rate than your income, which may be a tax effective option for you (depending on your income).

Example: Meet Morgan

Morgan is 25 years old and earns $60,000 per year. Assuming investment growth of 7.11% per year, see how much extra super she’ll have at age 65 if she starts salary sacrificing $60 per week at different ages.

  Extra contributions Growth Total
None $0.00 $0.00 $0.00
$60 a week from age 55 $26,520 $10,103 $36,623
$60 a week from age 45 $53,040 $51,230 $104,270
$60 a week from age 35 $79,560 $149,663 $229,223
$60 a week from age 25 $106,080 $353,949 $460,029

ASIC’s MoneySmart website offers a simple Super contributions optimiser calculator to help you work out which type of super contribution will give your super the biggest boost.

Is there a limit? There is a cap per financial year (currently $25,000) on the amount of concessional (before-tax) contributions that can be made. This includes salary sacrifice and compulsory employer contributions, as well as personal contributions which you claim as a tax deduction in your tax return. If your total before-tax contributions in a financial year exceed the contribution cap you’ll have to pay tax on those excess contributions. If you have more than one super fund, all before-tax contributions are added together.

2. The government can help contribute to your super

Making voluntary after-tax super contributions (called non-concessional contributions) may also be a good option for you. Because you’ve already paid income tax on the money, these contributions are different from salary sacrifice contributions which are deducted before your income is taxed.

How do you do this? You can make an after-tax contribution right now with BPAY®. To find your BPAY® payment details, please log into your membership using our MyLife Online service and select ‘Contribute via BPAY’ in the ‘Contributions’ menu. You need to make your BPAY® contribution by Tuesday, 26 June 2018 for it to be allocated to your super account before EOFY. Contact us for other ways to pay.

How does the government help? If you earn less than $51,813 per year (before tax) and make after-tax super contributions, you’re eligible for government co-contributions. The amount of the co-contribution you’re eligible for reduces as your earnings increase, but if you earn less than $36,813 the maximum co-contribution is $500 (based on 50c from the government for every $1 you contribute).

ASIC’s MoneySmart website offers a simple Super co-contribution calculator to help you work out if you are eligible for a co-contribution from the Government, and how much you can get if you are eligible.

What other benefits are there? If you make personal after-tax super contributions you can claim them as a tax deduction, effectively making the final tax you pay on them the same as concessional contributions (i.e. at most 15%). See the next tip for more details about getting tax back.

Is there a limit? There’s a cap per financial year (currently $100,000) on the amount of after-tax contributions you can make. If you’re under age 65, you can also ‘bring forward’ up to 3 years’ worth of after-tax contributions, which means you could contribute up to $300,000 in a financial year. However, if your total superannuation balance at 30 June of the previous year was $1.6 million or more, your after-tax contribution limit will be reduced to zero.

3. You might be able to claim a tax deduction

If you haven’t paid money into your super yet but wish you had, it’s not too late for this financial year. Claiming a tax deduction on your extra super contributions means you’ll pay less tax on investment earnings.

What benefits are there? Earnings on your super are taxed at a maximum of 15%, whereas earnings on personal investments outside of super are taxed at your personal (marginal) income tax rate (up to 45%). If you do this now, you can take advantage of the new rules from 1 July 2017, which allow almost everyone to make contributions and get tax deductions by putting money directly into their super account before 30 June each year.

Can anyone claim a tax deduction? Most people under age 75 can claim a tax deduction on personal super contributions, but conditions may apply. If you’re eligible, and are planning to claim a tax deduction, you’ll need to send a Notice of intent to claim form to us within strict timeframes. Please contact us to find out more about claiming a tax deduction on super contributions.

4. Don’t leave your contributions until the last minute

Contributions to super funds count for the year that they are received, not the date you make the payment. For example, if you make the payment on 28 or 29 June 2018 (30 June is a Saturday this year), we won’t receive it until 3 July 2018 at the earliest. That means it will be counted towards your contributions for the next financial year (2018/19), instead of this financial year.

What benefits are there? Each financial year, contribution caps reset, and rules can change. Getting your extra contributions sorted out now can remove any unnecessary complexity and paperwork.

How do you do this? We offer BPAY® payments, which are the quickest and easiest to make. You should pay contributions by Tuesday, 26 June 2018 at the latest to ensure your super contribution is allocated to your account in time. Different timeframes also apply to your employer’s contributions, including salary sacrifice.

Need more help?

If you have any questions, please contact us.

It’s important to note that the information in this article is general information only. It is not intended to be, and should not be, construed in any way as investment, legal or financial advice. Please consider your personal position, objectives, and requirements before taking any action. We recommend our members always seek financial advice before taking any action. Our financial planners can help you.