A key to maximising your retirement savings

Superannuation, commonly known as "super," is a critical component of retirement planning in Australia. To maximise the benefits of your superannuation, it's essential to understand the different types of contributions you can make. Two primary categories are concessional and non-concessional contributions. Let’s dive into the distinctions between these two types of contributions and their implications for your superannuation strategy.

Concessional Contributions

Concessional contributions are made to your superannuation fund before tax. They include employer contributions, salary sacrifice contributions, and personal contributions for which you claim a tax deduction.

These contributions are taxed at a concessional rate of 15% within your super fund. This rate is generally lower than most people's marginal tax rates, making concessional contributions a tax-effective way to boost your retirement savings.

Types of Concessional Contributions:

• Employer Contributions: These include the compulsory Superannuation Guarantee (SG) contributions that your employer must make on your behalf. As of the 2023-24 financial year, the SG rate is 11%.

• Salary Sacrifice Contributions: These are additional contributions you choose to make by directing a portion of your pre-tax salary into your super fund.

• Personal Deductible Contributions: If you're self-employed or not covered by employer contributions, you can make personal contributions and claim a tax deduction.

There is an annual cap on concessional contributions. For the 2024-25 financial year, this cap is $30,000. Contributions exceeding this cap are subject to additional tax and count towards your non-concessional cap.

Benefits:

• Tax Efficiency: Concessional contributions reduce your taxable income, potentially lowering your overall tax bill.

• Boost Retirement Savings: Regular concessional contributions can significantly enhance your super balance over time due to the power of compounding returns.

  
  
  

Non-Concessional Contributions

Non-concessional contributions are made to your super fund from after-tax income. These contributions do not receive a tax deduction.

Since non-concessional contributions are made from after-tax income, they are not taxed when deposited into your super fund. However, earnings on these contributions within the fund are taxed at 15%.

Types of Non-Concessional Contributions:

• Personal Contributions: Voluntary contributions made from your post-tax income.

• Government Co-Contributions: Eligible low and middle-income earners may receive contributions from the government when they make personal non-concessional contributions.

There is also an annual cap on non-concessional contributions. For the 2024-25 financial year, this cap is $120,000. Additionally, individuals under 65 can bring forward up to two future years of caps, allowing a contribution of up to $360,000 in a single year.

Benefits:

• No Contribution Tax: Non-concessional contributions are not taxed when deposited into your super fund.

• Maximize Super Savings: These contributions can be a powerful way to grow your super balance, especially if you've already maximized your concessional contributions.

  
  
  

Monitoring contributions to your SMSF

Our SMSF software will monitor and classify contributions by Members and by type. You can log in to your online reports 24/7 and see exactly what has been contributed, and how much remains before you reach the cap within each financial year. 

We can also provide strategic tax advice surrounding contributions. For further information, please give us a call.