Making extra super contributions before June 30 could help save on tax and boost your retirement balance. · Source: Yahoo Finance/Getty
The clock is ticking for Aussies to claim a significant tax saving and boost their retirement balance. Making extra superannuation contributions can reduce the tax you pay, but you’ll need to act before June 30 if you want to take advantage of it this financial year.
Concessional contributions, such as salary sacrifice contributions or personal deductible contributions, are generally taxed at a rate of 15 per cent within your super fund. That’s opposed to your marginal tax rate, which may be much higher than this at up to 45 per cent.
H&R Block director of tax communications Mark Chapman told Yahoo Finance making extra super contributions can be “one of the most effective EOFY tax planning strategies” and offer “immediate tax benefits”.
It also comes as putting money into superannuation becomes more attractive following budget changes to the capital gains tax.
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“For example, a taxpayer on a marginal tax rate of 32 per cent (plus Medicare levy) who makes a deductible super contribution may effectively reduce the tax payable on that portion of their income from approximately 34 per cent to 15 per cent,” Chapman said.
“The greatest tax benefits are often available to taxpayers on middle and higher incomes because the gap between their marginal tax rate and the 15 per cent super contributions tax is larger.”
Aware Super general manager of guidance and advice Peter Hogg told Yahoo Finance extra contributions could be a simple way to boost your retirement savings, while potentially improving your tax position.
For the 2025-26 financial year, the concessional contributions cap is $30,000 which includes employer super contributions. · Source: Getty
“For example, someone earning $80,000 who contributes an extra $5,000 to super may be able to reduce their tax by around $750, or about $850 including Medicare levy, depending on their circumstances,” Hogg said.
“You’re not avoiding tax – you’re just paying less of it, by moving money into a system that’s taxed more favourably.”
There are limits on the total amount you can add to your super each financial year before you attract a higher tax rate.
For the current financial year, the concessional contributions cap is $30,000, and this includes the super your employer has contributed.
Catch-up contribution rules mean that if your super balance was less than $500,000 on June 30 last year, you can carry forward any unused concessional cap amounts from up to five previous years.
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Deadline for superannuation contributions looms
Just over 679,000 people claimed a tax deduction for personal superannuation contributions in the 2022-23 financial year, the latest ATO data reveals.
The average deduction was $17,380, while the median deduction was $14,600.
Chapman said timing was “critical” as contributions needed to be received by your super fund by June 30 to count towards the current financial year.
“Leaving contributions until the final days of June can create a risk that processing delays result in the contribution being allocated to the following financial year,” he said.
Hogg said it was important to check your fund’s cut-off dates and allow extra time for BPAY, direct debit or bank transfers to clear.
AustralianSuper’s cut-off date, for example, is June 25, while Australian Retirement Trust’s cut-off date is June 22.
“Aware Super’s cut-off date to submit contributions for this financial year is 26 June, so it’s worth making any BPAY or direct debit contributions early the week before to make sure your fund receives them in time,” Hogg said.
For after-tax contributions, you’ll need to lodge a notice of intent form with your super fund to claim the tax deduction.
Chapman encouraged Aussies to consider their cash flow and personal financial circumstances before making extra contributions, as money contributed to super generally can’t be accessed until you retire.
Low-income earners could also consider the government co-contribution scheme, where the government matches your after-tax contributions by 50 per cent up to $500.
If your spouse’s income is under $40,000, you may also be able to claim a tax offset of up to $540 if you contribute to their super.
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