You can boost your super by making before-tax contributions to your account or asking your employer to redirect some of your before-tax salary into your super. There are lots of benefits, including paying less tax and growing your retirement nest egg faster.
Before-tax contributions (also known as concessional contributions) are contributions made with your pre-tax income. They are taxed at a concessional rate, which is generally lower than your marginal tax rate.
Making additional before-tax contributions is a great way to boost your super, while paying less tax, so you can retire with more.
There are limits set by the Australian Government on how much you can contribute to your super. The before-tax (concessional) contribution cap is $27,500 per year. If the combined total of your employer and salary sacrificed contributions exceeds this cap, you could end up paying extra tax.
How to make before-tax contributions
Most before-tax contributions are made by your employer on your behalf. These may be paid at:
- the minimum legislated rate, known as the Superannuation Guarantee (SG)
- the minimum rate set by an industrial award or agreement
- a higher rate set by your employer.
From 1 November 2021, your existing active super account will be ‘stapled’ to you and follow you when you move from job to job. When you start a new job, your employer may need to request your stapled super fund details from the ATO. Your employer will still offer you a choice of super fund.
A stapled super fund is as an existing active super account which is linked, or ‘stapled’, to you as an individual employee so that it follows you as you change jobs. This is different to the previous system where you were automatically placed in your new employer’s default fund if you didn't make an active choice.
Head to the Super stapling explained page for more information, or give the Helpline a call.
You can also set up additional before-tax contributions that are deducted from your pay, known as salary sacrifice.
You will need to set up a salary sacrifice agreement with your employer. Make sure you clarify the terms to ensure your employer SG contributions are calculated on your full pre-tax income and that salary sacrifice will not impact entitlements like long-service leave.
Important salary sacrifice considerations
Before you set up a salary sacrifice, consider the following:
- Salary sacrifice contributions are included in income tests used to determine eligibility for a range of government financial assistance programs including the government co-contribution, spouse contribution rebate, and self-employed deduction.
- Your employer contributions and salary sacrifice contributions count toward your concessional contributions cap. Any concessional contributions over the cap are taxed at your marginal rate. If your concessional contributions are close to the cap you should review your level of salary sacrifice contributions during the financial year.
- If you are paid weekly or fortnightly, some tax years will have an additional pay period which could result in your contributions exceeding the cap in that year (the cap for salary sacrifice is effectively reduced by your employer superannuation guarantee contribution).
- From 1 January 2020, your employer can not treat salary sacrifice contributions as satisfying their SG obligation or use them to reduce the ordinary time earnings calculation your super entitlement is based on. This means your employer must contribute the minimum SG contribution, as well as your agreed salary sacrifice amount to your super account.
- Employers often pay your salary sacrifice contribution in the month after it was deducted from your salary. This could result in a contribution being made in July for salary deducted in June. In this case the contribution will be included in the cap for the new financial year.
- If you are making salary sacrifice contributions as part of a transition to retirement strategy, you may need to review your salary sacrifice contribution amount and your pension payment against any adjustment to the caps.
If your employer doesn't offer salary sacrifice, you can make additional contributions from your take-home pay. If you claim these after-tax contributions as a tax deduction, they can also be converted into concessional contributions.
You may be able to split some of your before-tax contributions with your spouse. This is a great way to help boost their super savings while ensuring you still get the benefit of the lower tax rate on before-tax contributions.
You can only apply to split your super once per financial year and your balance cannot be less than $6,000 after the split.
The minimum amount you can transfer to your spouse is $1000 and the maximum is 85% of your contributions for the year.
The amount you transfer to your spouse still counts towards your contribution cap for the financial year.
To split your super, call the Helpline on 1800 640 886 and we will send you a super splitting pack containing:
- a statement with your before-tax contributions the previous financial year
- information on the maximum amount you can split
- the super splitting form you need to complete.
If you don't want to split your before-tax contributions, you can also boost your spouse's super by making after-tax contributions.
If your total superannuation balance is below $500,000 (on 30 June of the previous financial year) you may be able to take advantage of the 'carry forward' rule.
So how does it work?
Each financial year you can make before-tax (concessional) contributions up to your cap, which is currently $25,000. If you don't make before-tax contributions to your cap, you can carry forward this unused amount on a rolling basis for five years.
Effectively you're 'catching up' on the full amount you could have contributed in previous years.
The first year you will be entitled to carry forward unused amounts is the 2019-20 financial year. Unused amounts expire after five years.
Usually, any additional contributions above your cap are taxed at a higher rate, but catch-up contributions will be taxed at the concessional 15% in your super account.
Low Income Super Tax Offset
The Low Income Super Tax Offset (LISTO) is a government payment that is designed to offset the 15% tax low income earners have paid on their superannuation contributions (including employer contributions).
If you earn $37,000 or less in a financial year and make before-tax contributions to a complying super fund, up to $500 may be paid to your super account.
The ATO will automatically workout your LISTO when you lodge your tax return and make the payment to your super account.
Please ensure you have provided Media Super your Tax File Number or you will not receive the payment.