The Benefits of Making Additional Contributions

There are both long-term and short-term benefits to making additional contributions to your super. Below are five key benefits you may like to consider:

 

1. Compound returns

According to the government’s MoneySmart website, compound returns are the returns you earn on the money you initially deposited into an account AND the returns you’ve already earned (i.e. the returns on your return). The power of compounding helps you save more money, because the longer you invest, the more returns you earn, assuming return rates are positive.

As an example (using the (using the MoneySmart Compound Interest Calculator), someone with $15,000 in their account who deposits $10 a week for the next 30 years could end up with over $100,000!*

*The graph above is from the MoneySmart website and assumes an annual return rate of 5.00%, compounded monthly. Example for illustration purposes only. For detailed assumptions, visit the MoneySmart website and enter the details shown above.

 

2. Ability to claim tax deductions on after-tax contributions

After-tax super contributions are non-concessional contributions, unless you then claim these as a tax deduction (at which point they become concessional contributions). Claiming a tax deduction on any after-tax contributions that you make, may reduce your taxable income for that financial year.

Claiming a deduction on after-tax contributions is an option for people who are self-employed, or for employees who cannot or choose not to salary sacrifice via their employer. Click here to read the steps you’ll need to take if you wish to do this.

 

 3. Government super co-contribution

The government super co-contribution is designed to help boost the retirement savings of eligible individuals. If your income is under a certain threshold and you make an after-tax contribution to your super account, the government will also make a contribution of up to $500 each financial year. Click here to learn more.

 

4. Potential tax offsets

There are a few tax offsets that you may be able to access, if you meet the eligibility criteria

Low Income Super Tax Offset 

If your annual taxable income is $37,000 or less a year, and you (or your employer) make concessional super contributions, the government may refund the tax you paid on those contributions back into your super account, up to a maximum of $500 per year. This is called the Low Income Super Tax Offset (LISTO).

If you’re eligible for LISTO, it will be automatically calculated by the ATO and deposited in your super account after you lodge your tax return. You need to make sure that your super fund has your Tax File Number (TFN), otherwise your super fund will be unable to accept a LISTO payment.

For further information about the LISTO, please visit the ATO website.

Spouse contribution tax offset 

If your spouse isn’t working, or if their income is under a certain amount, you may be eligible for a tax offset of up to $540 per year if you make an after-tax contribution into their super account and meet certain conditions. Click here to learn more.

 

5. Downsizer contributions

If you are 65 years old or older in the 2021/22 year, and meet the eligibility requirements, you may be able to make a downsizer contribution into your superannuation of up to $300,000, using the proceeds from the sale of your home.

Your downsizer contribution is NOT considered as a non-concessional contribution, so it will not count towards your contribution caps. The ATO website has further information about this contribution type.

It’s important to note that making additional contributions doesn’t benefit everyone, not everyone is eligible to take advantage of some of the benefits of making additional contributions, and amounts contributed to super can only be accessed once a condition of release is met.

 

Questions?

Our Member Care Team are always happy to help. Click here to contact us.

This is part 4 of our 4-part series on contributions. Click on the links to read more:

    1. Your Guide to Super Contributions
    2. Concessional Contributions Explained
    3. Non-Concessional Contributions Explained
    4. The Benefits of Making Additional Contributions

Disclaimer: The content of this article includes advice that is general in nature and does not consider your personal situation. Christian Super encourages all people considering their options in retirement planning to seek out qualified professionals who can provide specific personal advice.

The information on this page was last updated on 12th May 2022.