Superannuation Strategies for Retirement Income - Contributions Defined

Thursday, July 08, 2021

There are two main types of contributions you can make into your superannuation. Each could make up part of your overall retirement investment strategy.

Have you ever felt confused about superannuation contributions and your options for structuring superannuation strategies for retirement? 

Here is an article to demystify the language, explain the differences, and determine the advantages of superannuation strategies using contributions.

Firstly there are Concessional Contributions. These have just increased in this new financial year and are now increased to $27,500 per year from July 2021 ($25,000 in 2020/21).  This amount is counted as a sum across the three following categories:

  1. Compulsory: this is paid by your employer to your superannuation
  2. Salary Sacrifice: you can ask your employer to pay extra money from your wages directly into your superannuation. This money is then not counted as part of your annual income so you do not pay income tax on it. Rather you pay the reduced rate of 15% tax within your superannuation.
  3. Tax-deductible: you can choose to make a contribution to your Superannuation from money you have, and then claim a tax deduction for it. This then means those funds will be taxed at 15% within your superannuation, rather than being part of your annual income tax. 

Secondly there are the Non-Concessional Contributions. The upper limits have just increased in this new financial year and are now set at $110,000 per year as of July 2021 ($100,000/y 2020/21).  An additional option exists in that there is a ‘bring forward’ rule that may apply, depending on your circumstances, which allows for a $330,000 one-off contribution within a 3 year period. So for example you could contribute $330,000 this financial year if the bring forward rule applied in your circumstances, but then no further non-concessional contributions for a another three years. These non-concessional contributions also give people the chance to increase the funds in superannuation as part of their retirement income strategy.

Personal after-tax contributions: you may have extra money due to a house-sale, inheritance, maturing term-deposits, lottery win for example. You could choose to place up to $330,000 (as above) into your superannuation. You cannot claim an income tax deduction on this money, but ongoing this provides a tax rate of 15% on those funds. Please see last month’s article on ‘Downsizer Contributions’ which are in addition to this option.

Superannuation is a complex arena and there are many potential arrangements within these superannuation contribution options. Best choices will depend on your individual circumstances, income, investments, and possibly if you have a partner or not. 

We recommend you to consult your Financial Adviser for your personal situation. Maher Digby, Sunshine Coast are specialists in superannuation retirement planning, so why not contact us today to find out more about your superannuation contribution options and best retirement strategies for your circumstances.

For more Information contact Mark Digby at Maher Digby Securities Pty  Ltd - Financial Advisers – AFSL No. 230559. This document was prepared without taking into account any person’s particular objectives, financial situation or needs. It is not guaranteed as accurate or complete and should not be relied upon as such.  Maher Digby Securities does not accept any responsibility for the opinions, comments, forward looking statements, and analysis contained in this document, all of which are intended to be of a general nature. Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend consulting a financial advisor