How to put more money into your super today

As we draw towards financial year end, it’s a good time to consider making extra contributions to your super. 

Who should put more money into super?

While anyone who wants to build their super balance should add to it when they can, there are people who might benefit from it more than others.

For example, if you are on a high tax bracket and trying to bring down your taxable income you may like to consider about voluntary contributions.

If you are earning $145,000 and decide to contribute an extra $10,000 to your super to claim a deduction it gives a tax saving of $3700 on your income but your super tax will be $1500.

The more you earn the more tax effective this becomes. For example, if you earn $200,000 and contribute $10,000 you will be saving $4500 in tax and the super tax will still be $1500 in the fund.

However, if you are earning more than $260,000 your employer superannuation guarantee (SG) is likely to take you over the limit for concessional contributions, so you won’t be able to receive a tax deduction for personal contributions.

Looking for a tax deduction by topping up your super?

Topping your super can bring down your assessable income.

To capture the benefit, you need to transfer the money into your super account and fill out an intent to claim form with your super fund the day you lodge your tax return for the year in which the contributions were made or the last day of the income year after the income year in which you made the contributions, whichever comes first.

Since it takes a few days to process the transfer, be sure to ask your super fund what the cut-off date is so you don’t miss the opportunity to claim the deduction in this year’s tax assessment. In other words, don’t wait until June 30 to make the change.  

How much can I contribute

For most people, the annual contribution limit is $30,000. Any amount above this will be taxed at a different rate. 

However, if you expect your super balance will be less than $500,000 on June 30 of the previous financial year, you can take advantage of the ‘bring forward’ rule which allows you to top up your super to the limit of any unused contribution cap amounts from the previous five years.

Check with the ATO to find out your personal limit for the current tax year. The ATO will have a record of your payments from previous years, and your super fund will be able to confirm how much has been contributed into your fund this financial year. This is helpful to make sure you don’t exceed the contribution limit.

Downsides of making extra contributions

Superannuation is a long-term savings vehicle and if you’re unsure of whether you want your savings locked up for the long-term you might want to keep your savings outside the superannuation environment.

Once you have put the money into super, you can’t withdraw it until you have met the strict requirements – including reaching preservation age, being diagnosed with a terminal illness, incapacity, or suffering serious financial hardship.

How you deposit money into super

Firstly, check you haven’t reached the contributions limit for the year. Include any contributions you’re expecting from your employer by 30 June. 

Be careful not to exceed your concessional contribution as you can be fined by the ATO if it has.

Once you’ve checked this, go to your super fund’s website or app, and search for “Contributions”. Your super fund should have information about the different types of contributions you can make.  

Look for the BSB and your individual account number to deposit your contribution. 

Fill out the ‘Intent to Claim’ form. You’ll need your account number, tax file number, and superannuation fund USI (you’ll also find this on your super fund app or website). Once complete, send it to the super fund – not the ATO. Give them plenty of time – at least a week – to ensure they are filing it appropriately and that you haven’t exceeded your limit.

Can you spread your top up between funds?

If you have more than one super fund, you will need to make sure the combined funds have not exceeded the $30,000 limit. You will also need to file two forms, and the second one will have to be filed as a variation on your ‘Notice of intent’.

Financial advice is critical

Remember, if you are looking to build your retirement savings and perhaps minimise tax, contributing more into super may be a good strategy. However, it’s a good idea to have a chat to a financial adviser in the first instance to make sure this is the best strategy for your own personal circumstances. Find a Financial Planner here.

The Money & Life website is operated by the Financial Advice Association (FAAA). The views expressed in this article are those of the author and not those of the FAAA. The FAAA does not endorse or otherwise assume responsibility for any financial product advice which may be contained in the article. Nor does it endorse or assume responsibility for the information.