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Superannuation Rules 101: Rules for Contributing to Your Super

Posted 7 Jun '22

When it comes to making contributions to your Superannuation, many people get lost in the many rules and stipulations that come with the territory. Although it can be quite confusing, making contributions and growing your super is a wonderful way to save for retirement.

From business owners and doctors to mining workers and even engineers, it can be quite beneficial to your financial future to familiarise yourself with the ins and outs of your superannuation. We’re here to help shed light on the top points of confusion when it comes to contributing to your super!

The Contribution Types

There are two types of contributions you can make— concessional contributions and non-concessional contributions. Simply put, concessional refer to before-tax contributions, while non-concessional refers to any after-tax contributions made to your super.

There are annual limits that apply to both contribution types! So, be mindful that contributing over the limit could lead to that amount being taxed extra.

Annual Contribution Limits

Concessional Contributions (before tax contributions)

Concessional contributions are contributions which are considered before tax or more simply put, the person or entity contributing are entitled to claim these as a tax deduction.  These include:-

  • Employer contributions (Superannuation Guarantee or additional employer contributions)
  • Salary sacrifice contributions (Employee voluntary contributions made from your salaried arrangement)
  • Voluntary Personal contributions for which you choose to claim a tax deduction for.

As of the 2022 year, the current contribution limit for concessional contributions collectively is $27,500.  This means that all contributions combined (employer + personal) cannot exceed this limit.  If they do, you will receive an excess contributions charge and notice from the ATO requiring you to pay additional taxes on this.

The Carry Forward Rule

You are now able to carry forward unused amounts of your concessional contributions cap on a rolling basis for 5 years provided your total super balance at 30 June of the previous financial year was less than $500,000.  You can find out your unused amounts through ATO online services using MyGov.

Non-concessional Contributions (after tax contributions)

On the flipside of concessional, you can contribute more to your superannuation fund that come from after tax monies or you are not intending on claiming a tax deduction for this.

As of June 30th of 2021, people with $1.7M+ in total for their super balance are not eligible to make non-concessional contributions. However, those with less than $1.7M are able to continue up to $110K per financial year OR $330K collectively over the course of three years. This goes for everyone under the age of 67, with the one exception that someone 67 years or older can call upon the “Bring-Forward Rule.”

Government Co-Contributions

Want to know how you can get an extra $500 from the government? As you may know, the government co-contribution is a plan that provides people the chance to receive an additional amount towards their super. The government will pay an extra .50 towards your super for every $1 of non-concessional you include. They will do this for up to $500! This incentive is for lower income earners and there is a range of eligibility requirements so ensure you check these before contributing.

Changes coming in July 2022

There are a few changes in motion when it comes to the required SG contribution rate.

From 1 July 2022, if you are under 75 years old you can make or receive personal superannuation contributions and salary sacrificed contributions (within your existing contribution cap limits) without needing to meet the work test provided you are not intending to claim a personal superannuation contribution deduction.

From 1 July 2022, the government has removed the threshold for monthly earnings. This means that employers will need to contribute SG on ordinary time earnings (OTE) even if the employee makes under $450 a month.

The required SG contribution rate is proposed to increase the 12% by 1 July 2025.  From 1 July 2022, the new SG rate will increase to 10.5%.

If you are an employer and manage your payroll through Xero or another online provider, it is likely these changes will automatically be updated but we do highly recommend the first payrun you process from 1st July 2022 you manually check these increases have taken effect.

Please note, if you offer an inclusive salary packaged arrangement (i.e. employee is on $60,000 inclusive of super), you will be required to manually change the pay rate for this employee if you wish the SG increase to not increase their entire package.

If you are an employer and you are not sure whether you should be paying super or not for your employees, this is a great little tool from the ATO to assess your eligibility.

How Super Can Save You Tax

If you’re under the age of 75, you can reduce the amount of taxes you owe through making voluntary personal contributions. Notably, if you are 67+ years, you will have to pass The Work Test before you are deemed eligible.

The Work Test

If you have reached 67 years of age, you may want to pay attention to this fact! The Work Test was designed to determine how many hours individuals between the ages of 67 and 75 should work within a month to be eligible to make contributions.

The rule is that you need to work a minimum of 40 hours within the span of 30 successive days to be eligible. Of course, there are some caveats to that rule. If your super balance was less than $300K the previous 30 June, you are eligible to be excused from The Work Test for 12 months. Remember, this exception can only be applied once.

Making a contribution

If you are considering making a contribution and wanting to know the tax impact of that contribution we can assist by calculating a tax estimate and demonstrating to you the tax refund of this.

If you are not sure whether making a contribution is in your best financial interest for your circumstances, we cannot provide this service but highly recommend you seek the services of a financial planner who can assist you with this decision making.

If you have made a contribution in your individual name and want to know how to ensure it is claimed as a tax deduction, please reach out to your superannuation fund directly.  They will have a notice of intent form that you will be required to complete and lodge directly with the fund.  Once they have processed it, you will receive a letter acknowledging this.  This letter is what we require to include within your tax return preparation.

Lost Track of Super?

Have you changed your address, name, or job? Have you lost track of all information about your superannuation? Perhaps you even have more than one super account that has yet to be consolidated into one?

The ATO has some great resources available to help you track this down and ensure you are able to locate your super.

Need more help?

While superannuation guarantee information and stipulations were not designed to be purposely confusing, that doesn’t mean they are always easy to understand! Our team of professionals at Empire Accountants can assist you in a limited capacity with superannuation in calculating the tax impact superannuation contributions will have on our overall position.   Our recommendation with superannuation is to speak to a financial advisor to ensure the contributions to superannuation are in your best interest now and into the future. If you want a recommendation to a financial advisor, please reach out to your Accountant and we are more than happy to provide options to you.

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