Superannuation contribution considerations

Are you making the most of the superannuation opportunities that are available?

While many of us receive regular superannuation guarantee (SG) contributions from our employer into our superannuation account, making your own additional contributions now can save you tax and give your superannuation balance a boost.

Keep in mind that your superannuation contributions must fall within annual limits which help to keep the superannuation tax arrangements affordable for the Government. Age limits also apply.

We recommend speaking to your financial adviser before making additional contributions to your superannuation.

Concessional contributions

Concessional contributions are generally:

• contributions your employer makes, which include:
  • Superannuation Guarantee contributions (which employers must make by law); and
  • Salary sacrifice contributions, which are made under an agreement between you and your employer, where you’ve agreed to receive less income in return for extra superannuation contributions; and
• any contributions that you make yourself and claim as a tax deduction in your income tax return.

These contributions are ‘concessional’ because they’re taxed at 15%t in the super fund instead of at your marginal tax rate.

Low Income Superannuation Tax Offset

The low income superannuation tax offset (LISTO) compensates low income earners for the tax paid by their super fund on concessional contributions. If you’re eligible, the government will pay a LISTO to your super fund equal to 15% of your concessional contributions for the year. The maximum LISTO is $500.

To be eligible for the LISTO you need to:

• have concessional contributions made to a complying super fund
• have adjusted taxable income¹ of $37,000 or less in the financial year
• receive 10% or more of your income² from eligible employment or carrying on a business
• not hold a temporary resident visa at any time during the year.

Additional contributions tax for high income earners

An additional 15% tax (known as Division 293 tax) applies to certain concessional contributions made for you if your income³ plus concessional contributions are more than $250,000. This still compares favourably to the highest marginal tax rate of 45% plus Medicare levy. If you’re impacted by Division 293 tax, or if you’d like to know more about it, visit the ATO website or speak with your adviser.

Concessional contributions cap

There is an annual limit on the total amount of concessional contributions that you can make, known as the concessional contributions cap. In the 2023/24 financial year, the concessional contributions cap is $27,500. In the 2024/25 financial year, the cap will increase to $30,000 in line with indexation rules.

If you haven’t been contributing up to the annual cap in the past five financial years, you may be able to make extra concessional contributions in the current or future financial years. To be eligible for this special carry forward rule, your Total Superannuation Balance⁴ must be less than $500,000 at 30 June of the previous financial year (i.e. 30 June 2023 for the 2023/34 financial year). To learn more about how the carry forward rule works, visit the ATO website or speak with your adviser. You can check your available carry forward concessional contribution amounts by logging into ATO online services through your myGov account.

How to make concessional contributions

If you work as an employee, ask your employer how to put in place a salary sacrifice arrangement. This may benefit you if you like the convenience of having regular contributions deducted from employment income before receiving it.

Alternatively, you might consider making contributions personally and claiming them as a tax deduction in your tax return. This strategy may be useful if you’re self-employed, your employer doesn’t allow you to salary sacrifice, or you just want to make a one-off contribution. Eligibility conditions apply, including a requirement to submit a form within certain timeframes and meet a work test if you’re aged between 67 and 74. To learn more about making personal deductible contributions, visit the ATO website or speak with your adviser.

You can make personal contributions into your Macquarie Wrap superannuation account via:

• BPAY®
• electronic funds transfer (EFT), or
• direct debit.

To read more about these options, you can visit this Help Centre article.

Non-concessional contributions

‘Non-concessional’ contributions are usually made with amounts that have already been taxed, eg. at individual marginal tax rates.

You might consider making non-concessional contributions if you’ve already maximised your concessional contributions, have a cash flow surplus, have savings outside superannuation that you want to invest in a tax-efficient way, or you’ve received a windfall like an inheritance or bonus. The benefit of making non-concessional contributions is that, once in the superannuation environment, the investment earnings receive concessional tax treatment within the fund. This treatment generally compares favourably to earnings on investments held outside superannuation.

Government co-contribution

The Government co-contribution aims to encourage people to make personal non-concessional contributions.

To qualify for a co-contribution in the 2023/24 financial year you need to:

• make personal superannuation contributions to a complying super fund or a retirement savings account that are within your non-concessional contributions cap
• have income⁵ of less than $58,445 in the financial year
• have a Total Superannuation Balance⁶ of less than $1.9 million as at 30 June 2023
• receive 10% or more of your income⁷ from eligible employment or carrying on a business
• not hold a temporary resident visa at any time during the year
• lodge an income tax return for the relevant year
• be less than 71 years old on the last day of the income year.

If you’re eligible, the government will contribute $0.50 per $1 of non-concessional contributions made up to a maximum amount of $500. The maximum is reduced by $0.03333 for each dollar of income you earn over $43,455, phasing out completely at $58,455. The co-contribution thresholds are indexed each year in line with wages. For more information, visit the ATO website or speak with your adviser.

Spouse contribution tax offset

Making a non-concessional contribution for a low income spouse (earning $40,000 or less in the financial year) may entitle you to a spouse contribution tax offset of up to $540. Eligibility conditions apply. To learn more, visit the ATO website or speak with your adviser.

Non-concessional contributions cap

Non-concessional contributions are capped at $110,000 in the 2023/24 financial year, increasing to $120,000 in the 2024/25 financial year in line with indexation rules. A special ‘bring-forward’ rule allows people under age 75 to contribute up to three times the annual cap in one year, which effectively brings forward the cap for next one or two financial years. Eligibility conditions apply, including limits on your Total Superannuation Balance. To learn more, visit the ATO website or speak with your adviser.

How to make non-concessional contributions

You can make contributions into your superannuation account via:

• BPAY®
• electronic funds transfer (EFT), or
• direct debit.

To read more about these options, you can visit this Help Centre article.

Splitting your contributions with your spouse

Concessional contributions you make may be able to be transferred to your spouse’s superannuation account either within the same super fund or another super fund. This is known as contributions splitting.

There are limits on amounts that you can split to your spouse in a year. The limit is the lesser of:

• 85% of the total of concessional contributions you made in the year
• your concessional contributions cap (inclusive of any used concessional contribution cap carried forward from previous financial years)
• the taxable component of your superannuation account.

Note: the original contribution (before the split) is counted towards your concessional contribution cap. A split contribution will not count towards your spouse’s contribution cap.

A contribution split to your spouse can generally only be processed once each year and your spouse must be under age 65 and not retired, or under their preservation age⁸. The benefits of splitting your contributions with your spouse can include:

• increasing your spouse’s superannuation benefits
• managing your Total Superannuation Balance to remain eligible for various superannuation concessions
• if your spouse is older, they may become entitled to access tax-free superannuation benefits (from age 60) before you
• social security advantages if your spouse is younger than you – if they’re under the Age Pension age, their superannuation assets in the accumulation phase are not assessable under the assets test.

To learn more about spouse contributions-splitting, visit the ATO website or speak with your adviser.