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More than three million Australians pulled money from their super in 2020 to help them navigate the pandemic lockdowns. If you were one of them, here are some ways to help get your retirement savings back on track.

If you’re concerned about achieving your retirement goals after withdrawing funds from your super in 2020, you’re not alone. Three and a half million Australians accessed their super early under the Federal Government’s COVID-19 Superannuation Early Release program, which closed in December 2020.

First-time applications averaged $7,402. Repeat applications, and there were 1.4 million of them, averaged $8,268, according to the Australian Prudential Regulation Authority (APRA).

Fortunately, there are ways to make extra contributions to your super and help get back on track.

What you can do if you want to give your super a boost

There are many ways to save for your retirement and topping up your super may be one of them.

Here are a few options to think about:

  • Salary sacrifice (before-tax) contributions – you may arrange with your employer to deposit some of your pre-tax salary directly into your super, instead of taking it all as pay. For more information visit the ATO website.
  • Personal (after-tax) contributions – you can make contributions from your take-home pay (or after-tax income) to your super, either through BPAY or bank transfers. Click here to make a payment.
  • Government co-contributions –if you’re a low to middle income earner and make personal (after-tax) contributions to your super, the government may also make a contribution to your super up to a maximum of $500. For more information visit the ATO website.
  • Spouse contributions – if your spouse is a low-income earner or isn’t working, you may be eligible for a tax offset of up to $540 for the 2022-23 financial year for any personal (after-tax) contributions made to your spouse’s super. For more information visit the ATO website.
  • Downsizer contributions – if you’re 55 years old or older, you can put up to $300,000 into your super using the money from the sale of your main residence. For more information, and the downsizer contribution form visit the ATO website.

Contributing to your super now may result in more money for your retirement, while potentially paying less tax.

Depending on your circumstances, putting money into your super now may be a tax-effective way to save for your retirement.

  • It may reduce your taxable income - by redirecting some of your pre-tax salary to your super, you could reduce your taxable income. This could result in you paying less tax.
  • Tax on super contributions may be lower than your income tax rate - concessional super contributions (before tax) are taxed at 15% (if you earn less than $250,000 including super contributions) or 30% (if you earn more than $250,000 including super contributions). This is generally lower than the individual tax rate that applies to your income, which can be as high as 47%.

What you need to consider

How much can I contribute? Is there a limit? 

Before making any decision it’s important you understand and consider what you might be eligible for based on your own personal circumstances and finances, including what super products you have, whether contribution caps apply, and what you can afford and are comfortable making. Speaking to a financial adviser can help you accurately assess your situation. 

Concessional and non-concessional contributions and caps

Contributions are subject to yearly caps. It’s important to be aware of these caps because if your total contributions exceed the caps, you may have to pay additional tax on the excess contributions.  There are two main contribution caps:

  • Concessional cap (before-tax)
  • Non-concessional cap (after-tax

Concessional contributions are super contributions made before-tax and include employer contributions such as super guarantee and salary sacrifice contributions. They also include personal contributions for which you claim a tax deduction.   These contributions are taxed at the concessional rate of 15% (if you earn less than $250,000 including super contributions) or 30% (if you earn more than $250,000 including super contributions).

From 1 July 2023, the general concessional contributions cap is $27,500, for everyone, regardless of age.

Non concessional contributions are super contributions made from after-tax pay and include personal contributions you make into your super that are not claimed as a tax deduction, and spouse contributions.

From 1 July 2023, the non-concessional contributions cap is $110,000.

If you’re under 75, and your total super balance is less than $1.7 million as of 30 June 2023, you may be able to take advantage of the bring-forward rule. This rule allows you to bring forward up to two future years of non-concessional contribution caps into the current year and contribute up to $330,000 in a single year.

For more information about contribution caps, visit the ATO website.

It’s now easier for older Australians to add to their super

Before 1 July 2022 people aged 67 to74 could only make personal contributions into their super if they satisfied the federal government’s ‘work test’. This test required you to have worked for at least 40 hours in a consecutive 30-day period within a financial year.

The government has abolished this rule, meaning people aged 67 to 74 can now contribute to their super whether or not they’re still working. However, the work test may still apply if you intend to claim a tax deduction for a personal contribution.

Contribution rules from age 75

Once you reach age 75 you can’t make personal super contributions, even if you’re still working. However, you can still receive mandatory contributions an employer must make by law or under an industrial agreement.

If you’re eligible (and if your super fund allows it) you can also make a one-off ‘downsizer contribution’ from the proceeds of the sale of your family home.

Other things to think about 

  • Super is generally a long-term investment, and the value of your super can go up and down. Before making extra contributions, make sure you understand the potential risks.
  • The government sets rules about when you can access your super. Generally, you can only access it when you’ve reached your preservation age (which will be between the ages of 55 and 60 depending on when you were born) and when you retire.  For more information about accessing your super earlier, visit the ATO website
  • We recommend that you speak with a financial adviser or tax professional to see if contributing to super could be an effective strategy for you.  We have provided general information only and your individual circumstances may be quite different. 

Download your form

If your super guarantee contributions are currently paid into another super fund and you would like to have it paid to your Resolution Life super account instead, you can download the form below and provide it to your employer. You’ll need your account number or product name to download the right form.

https://resolutionlife.com.au/findaform/choice-superannuation-fund-letter-compliance-online

Find out more:

If you have any questions:

Important information

Any advice and information on this website is general in nature and is provided by Resolution Life Australasia Limited ABN 84 079 300 379, AFSL No. 233671 (Resolution Life), which is part of the Resolution Life Group. Resolution Life can be contacted on 133 731 or via the contact us page. The advice does not take into account your personal objectives, financial situation or needs. Therefore, before acting on the advice, you should consider the appropriateness of the advice, having regard to those matters as well as the relevant product disclosure statement (PDS) or policy document, available from Resolution Life at resolutionlife.com.au or by calling 133 731, before making a decision about the product. Consider speaking to a financial adviser if you have any concerns.

If you decide to purchase or vary a financial product, Resolution Life and/or other companies within the Resolution Life Group will receive fees and other benefits, which will be a dollar amount or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.

Life Insurance Code of Practice

The Life Insurance Code of Practice is issued by the Financial Services Council (FSC) and sets out the life insurance industry’s commitment to high customer service standards, consistency and principles of conduct.

As a member of the FSC, Resolution Life supports the Life Insurance Code of Practice. You can find more information here.

 

[1] APRA, ‘COVID-19 Early Release Scheme - Issue 36’, 8 February 2021, accessed 25 August 2022.