Tax tricks to boost your return and retirement fund

From concessional contributions to government contributions and even a tax offset, superannuation is one of the most tax-effective ways to build your savings for retirement.

First off, did you know that you can make additional concessional superannuation contributions up to your concessional contributions cap (currently $27,500) and claim a 15 per cent income tax deduction for doing it?

This means you can effectively top up your super, provided you don’t breach your concessional contributions cap. This is a great way to use up any spare cash you have before June 30 and, at the same time, boost your retirement savings.

These tax benefits can help your retirement savings stretch further. (Source: Getty) (Samantha Menzies)

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The super guarantee payments made by your employer, as well as any salary-sacrificed contributions, are also included in your concessional contributions. So, effectively, the amount you can pay into super through a tax-deductible contribution is the difference between those other contributions and the $27,500 cap.

But if you are aged between 67 and 74, you’ll need to pass the work test to make a tax-deductible contribution. That means you have to work 40 hours or more in a consecutive 30-day period in the financial year in order to make contributions.

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Although, from July 1, 2022, you can make or receive non-concessional personal contributions (which have a separate limit of $110,000 per year, but don’t attract a tax deduction) without meeting the work test. However, you must still meet the work test to claim a deduction for personal superannuation contributions so they are treated as concessional contributions.

Here’s an example:

Todd is a full-time dental assistant. During 2023-24, he earned $50,000 before tax and has no other income. Todd makes a personal contribution to an eligible super fund and notifies them that he intends to claim a deduction. Todd’s super fund acknowledges that he will claim a $15,000 deduction and taxes the contribution at 15 per cent. Todd is eligible to claim a deduction for $15,000 and does this in his 2024 income tax return.

But making additional contributions isn’t the only way for your super to benefit at tax time.

Here are five more tax concessions that don’t produce tax deductions but do offer a range of additional benefits:

1. Carry forward concessional contributions

From July 1, 2018, you can carry forward the unused part of your annual concessional contributions cap for up to five years (using up the earliest year first) provided your superannuation balance is less than $500,000.

The unused cap amounts you can carry forward depend on the amount you have contributed in previous years, starting from 2018–19. You can carry forward unused cap amounts from up to five previous financial years. After this time they will expire.

Where you make concessional contributions that exceed the $27,500 annual cap (and don’t have the ability to absorb the excess through unused carried-forward contributions), the excess is included in your assessable income for income tax purposes as excess contributions.

A 15 per cent tax offset is available to recognise that 15 per cent tax has already been deducted on the original contribution. You can withdraw up to 85 per cent of your excess contributions from your super fund to pay your income tax liability.

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2. After-tax contributions

After-tax contributions are known as 'non-concessional contributions' because you don't receive a tax deduction (because you would have already paid tax on this income). This is the easiest way to top up your super because you simply deposit your own money into your super account.

So, if you have some spare cash, this is a great way to give your retirement savings a boost because the money is then in a low-tax environment, meaning you’ll generally get a better return than if you’d invested in the same assets outside super.

From July 1, 2021, you can pay up to $110,000 in non-concessional contributions each year, but if your superannuation balance is more than the general transfer-balance cap ($1.7 million for 2022-23 and $1.9 million for 2023-24) you cannot make non-concessional contributions.

Going forward, the non-concessional cap will always be fixed at four times the amount of the concessional cap so, as one goes up, so will the other.

There is also a three-year “bring-forward” rule for taxpayers who are under 75 years of age, which allows you to make a contribution of up to $330,000 for the current and next two income years.

Non-concessional contributions paid into your super fund that exceed the cap can be withdrawn without suffering a financial penalty but any earnings on that money will be included in your assessable income for income tax purposes and taxed at your marginal tax rate (less a 15 per cent tax offset).

If you choose not to withdraw the excess contributions from your super fund, you will be taxed on the excess amount at the top 45 per cent marginal rate of income tax (plus 2 per cent Medicare levy), irrespective of your actual marginal rate.

3. Government co-contributions

To help you save for retirement, the government has an incentive program that rewards you for making eligible personal contributions to your superannuation fund. If your total income is less than $43,445 (for 2023-24), the government will match your eligible superannuation contributions by 50 cents per dollar up to a $500 annual maximum.

The superannuation co-contribution phases down for eligible individuals with total income between the lower and higher income thresholds, tapered by a rate of 3.333 cents for each dollar of total income for the year that exceeds the lower income threshold.

Your total income	Your payment	The benefit
$43,445	$1,000	$500
$49,445	$1,000	$300
$55,445	$1,000	$100
$58,445 or more	$1,000	$0

It then ceases once the upper threshold - which is $15,000 above the lower threshold, making it $58,445 for the 2023-24 year - is reached.

To qualify for the government co-contribution, you need to meet a number of conditions.

4. Low-income superannuation tax offset

If you earn income up to $37,000, you will receive a refund into your superannuation account equivalent to the tax paid on your concessional superannuation contributions (for example, the super paid for you by your employer) up to a cap of $500.

This means that most low-income earners will pay no tax on their super contributions and recognises that, without the existence of the offset, lower-paid Aussies are actually disadvantaged by the super system since they are charged tax at 15 per cent on super contributions, which may be higher than their actual marginal rate of tax.

You don’t need to do anything to claim the offset. The Australian Taxation Office (ATO) will determine if you are eligible and arrange the offset.

Here’s an example:

Gilbert earns $36,000 a year from his job in a supermarket. Gilbert’s employer has paid $3,330 into his super account this financial year. When he lodges his tax return, the ATO calculates that he is eligible for a low-income super tax offset from the government and they accordingly pay $495 into his super account. This makes up the $495 ($3,300 x 15 per cent), which the super fund has paid in tax on Gilbert’s contributions.

5. Paying super to your spouse’s super fund

If your spouse earns a low income or doesn’t work at all, you can claim an 18 per cent tax offset (up to $540 per year) if you contribute to a complying superannuation fund on their behalf.

To qualify, your spouse’s assessable income plus reportable fringe benefits amounts and reportable super contributions must be less than $37,000. Above that, the offset is gradually reduced and cuts out altogether once your spouse’s income exceeds $40,000.

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