Get the maximum for your super before the financial year ends

The end of the financial year is fast approaching, so you only have a few days to get your superannuation shipshape before June 30.

Keep in mind that if you miss deadlines to do things this year you miss the opportunity to make the most of your retirement savings long term.

There are a few ways you can boost your super by making extra contributions.

“You should check on your MyGov account for the amount of super that has been contributed to your account over the year,” Yield Financial Planning director James McFall said.

You can also ask your employer for details.

You are allowed concessional contributions of up to $27,500 a year, so if you have extra cash, use it to boost your concessional contribution this year.

Remember you will only be taxed at 15 per cent on that contribution, so there is a tax saving using this method, as well as giving your super a boost.

“You get a benefit if your tax rate is above 19 per cent, but it becomes a serious tax advantage if you are paying 32.5 per cent or more in tax,” Mr McFall said.

For anyone who is cashed up, unused concessional contributions caps can be added up back to 2019-20 and made as a concessional contribution to super in one year.

The ultimate catch-up limit, now reached, is five years.

“That can be useful to reduce tax bills if you have made a capital gain over the year,” Mr McFall said.

You can’t use this measure if you have more than $500,000 in super already, and it can only be used once.

Be sure you don’t break contribution limits as the Australian Taxation Office (ATO) will then make you pay any tax you saved by making the concessional contribution.

If you don’t choose to withdraw the excess once the ATO has told you about it, you could be taxed as much as 94 per cent on it – so don’t make that mistake.

Non-concessional contributions

If you have a significant amount of money through, say, selling an asset or an inheritance, you can make a non-concessional contribution.

These are contributions that don’t get you a tax deduction – you can put in as much as $110,000 a year or up to $330,000 for three years in advance.

There are a couple of restrictions applying here.

You can’t make non-concessional contributions at all if you have a super balance of $1.7 million and you can only make contributions that bring you up to that amount if you are close to it.

Check the ATO website for full details.

COVID early release recontributions

During the COVID-19 emergency the government allowed anyone in financial trouble to withdraw up to $20,000 from their super to tide them over.

Australians took $38 billion out of super under that measure but some people may now be in a position to recontribute.

If you wish to do that you can make repayments until June 30, 2030, in single or multiple payments.

You won’t get a tax deduction for those as they will be considered non-concessional contributions.

But they will not count towards your non-concessional contributions cap.

However, the recontribution will count towards your transfer-balance cap – the balance beyond which you can no longer make non-concessional contributions.

Contributions for older people

Until the beginning of this financial year if you were aged 65 to 74 you had to pass a work test – working 40 hours over 30 continuous days – to make personal contributions to super. Now that doesn’t apply.

So if you thought you were too old to contribute, think again.

If you’re under 75 you can top up your super subject to contribution caps. But if you want to make it tax deductible you still have to pass a work test.

There are three measures aimed at low- or middle-income earners where the government contributes to super.

Spouse super contribution

If either member of a couple earns $40,000 or less, then their spouse can make a $3000 contribution to their super.

Where the low-income spouse earns $37,000 or less, then the contributing spouse will receive a tax offset of $540 to take off their tax bill. The benefit comes out between $37,000 and $40,000.

Remember – to claim the benefit, the contribution must be made by June 30. The benefit will be paid when the contributing spouse submits their tax return.

Government co-contribution

This benefit is designed to help low- and middle-income earners boost super.

If you have an income of $58,445 or less and you make a personal, non-concessional contribution of $1000 to your super, the government will give you a maximum co-contribution of $500.

The maximum amount goes to anyone earning up to $43,445.

That, said Mr McFall, is attractive.

“You get $500 into your account, tax free, so it is a 50 per cent rate of return,” he said.

Remember you have to make the contribution as non-concessional or you won’t get the benefit.

Low Income Super Tax Offset

LISTO is a benefit that effectively cuts contributions tax for anyone earning less than $37,000 so that people are not paying more tax on super contributions than they are on wages and salaries.

If you earn $37,000 or less and at least 10 per cent of that income comes from work or business, the government will put up to $500 tax free into your super account.

LISTO will be paid into your account automatically, but be sure your super fund has your tax file number or you won’t receive it.

The New Daily is owned by Industry Super Holdings

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