Five ways to save tax on super contributions

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Published 14 June 2021

It’s almost the end of the financial year. This is a good time to review your superannuation and see if you are entitled to any tax savings on your contributions.

Everyone’s tax is different. Depending on your salary level, the Government offers tax benefits on super contributions.

Here are five options that may be available to you...

1. Salary sacrificing

Generally, salary sacrifice can be a tax-effective way to grow your super if your annual income is more than $45,000 (financial year 2020/21).

Salary sacrifice is when you and your employer agree to make an additional contribution to your super from your before-tax pay. This is known as a concessional contribution and is taxed at 15% when it enters your super. For many people, this is lower than the marginal tax rate on their income. You benefit because you pay less tax while you grow your retirement savings.

Remember, there is a limit to how much you can contribute during the financial year – this is covered at the end of this article.

If you are interested in setting up a salary sacrifice, talk to the HR or payroll team at your workplace. Or you can call us on 1800 444 396 if you would like to discuss your options with us.

Find out more: Salary Sacrifice info sheet

2. Tax deductions on personal contributions

If you make extra contributions from your after-tax pay, you may be entitled to a tax deduction. By growing your super further with personal payments, you could get a tax deduction now and have more money to enjoy in retirement.

When personal (non-concessional) contributions are claimed as a tax deduction, they count towards your concessional contributions cap – see the end of this article for more on this.

We recommend you speak to your accountant or financial adviser if you are unsure of the potential implications of claiming a tax deduction. Contact us on 1800 444 396 if you would like to discuss further.

If you are thinking of claiming any contributions as a tax deduction, you will need to complete a Notice of intent to claim or vary a deduction for personal contributions and send it to LGIAsuper. Generally, you can do this during the next financial year and before you lodge your tax return.

Find out more: Tax deduction for personal contributions info sheet

3. Government co-contribution

If your annual income is less than $54,837 (financial year 2020/21) and you make after-tax contributions, you may be eligible for a co-contribution from the government.

The amount of government co-contribution you receive depends on your income and how much you contribute. Information about eligibility and how to receive this co-contribution is in the info sheet below.

Find out more: Super support for low and middle-income earners info sheet

4. Low income super tax offset

The Government provides further assistance if you are on a lower income. You may be eligible for a low income super tax offset (LISTO) if you earn less than $37,000 in the financial year.

The LISTO is calculated on 15% of your before-tax (concessional) contributions that you or your employer pays into your super. The maximum payment you can receive for a financial year is $500, and the minimum is $10.

This offset is usually paid directly into your super fund. You don’t need to do anything to receive this offset, although you will need to make sure your super fund has your tax file number.

Find out more: Super support for low and middle-income earners info sheet

5. Tax offsets for spouse contributions

Spouse contributions are a good way to grow your partner’s super so you can both enjoy a better lifestyle in retirement.

You could also receive a tax offset if your partner earns between $37,000 and $40,000 each year.

A contributing spouse can claim a maximum tax offset of 18% of the first $3,000 of contributions made on behalf of the receiving spouse. This $3,000 maximum is reduced by $1 for every dollar of income over $37,000 – which is why this offset cuts out at $40,000.

Find out more: Super for your partner info sheet

Watch out for your contribution caps

There are annual limits to how much you can contribute to your super. These are your contribution caps, and you may have to pay extra tax and a fee if you exceed them.

Read our recent article to learn about your two caps (concessional and non-concessional) and the allowances you may be entitled to for unused cap amounts.

Please note that caps for both concessional (before-tax) and non-concessional (after-tax) contributions are increasing in the 2021/22 financial year – as shown in the table below.

Cap type 2020/21 2021/22
Concessional contributions cap $25,000 $27,500
Non-concessional contributions cap $100,000 $110,000

During the financial year, we recommend you check you are staying under your contribution caps. The quickest and easiest way to do this is to log in to your account. Alternatively, you can contact us on 1800 444 396, and we can provide this information to you.

Find out more: Contribution caps info sheet

Allow time for payments to clear

If you want a contribution counted towards your 2020/21 contribution caps, you should allow plenty of time for it to clear in the fund before the end of the financial year.

Please check with your bank for processing times for BPAY payments.

We’re here to help

If you would like further information about the tax benefits on super contributions, please call us on 1800 444 396.

 

This article has been produced by LGIAsuper Trustee (ABN 94 085 088 484, AFS Licence No. 230511) as trustee for LGIAsuper (ABN 23 053 121 564) and may contain general advice, which has been prepared without taking into account your objectives, financial situation or needs. As such, you should consider the appropriateness of the advice to your objectives, financial situation and needs before acting on the advice. You should also obtain and consider the Product Disclosure Statement (PDS) for your account before making any decision to acquire or contribute additional amounts to your LGIAsuper account – available to download at https://lgiasuper.com.au/pds or call us on 1800 444 396 to request a copy. This email contains information that is up to date at the time of publishing. Some of the information may change following its release. Any questions can be referred to LGIAsuper by calling us on 1800 444 396 or by emailing us at info@lgiasuper.com.au.

Learn more

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Superannuation contributions