Potential tax savings through super

Key takeaways

• If you contribute some of your after-tax income or savings into super, you may be eligible to claim a tax deduction

• Making a salary sacrifice contribution into super could see you pay less tax than if you received the money as take-home pay

• If your spouse is not working or earns a low income, making an after-tax contribution into their super may see you qualify for a tax offset of up to $540.

Want to help boost your retirement savings while potentially saving on tax? 

Here are five smart super strategies to consider before the end of financial year.

With all super strategies, there is specific eligibility criteria. To see if you’re eligible, check the Australian Taxation Office.

1. Add to your super – and claim a tax deduction

If you contribute some of your after-tax income or savings into super, you may be eligible to claim a tax deduction. This means you’ll reduce your taxable income for this financial year and potentially pay less tax. 

How it works

The super contribution is generally taxed at up to 15% in your super fund (or up to 30% if you earn $250,000 or more). 

Depending on your circumstances, this may be a lower rate than your personal tax rate, which can be up to 47% (including the Medicare Levy) – so you could save up to 32%.

It’s important to note that there are limits on the amount of personal contributions you can claim as a tax deduction each financial year. The cap—which includes both employer and personal contributions—is $27,500 for the 2022-23 financial year. If you exceed this cap, you may be subject to additional tax. 

You may be eligible to contribute more than $27,500 without penalty if you didn’t use the whole cap in previous years. This is called catch-up concessional contributions which apply to unused cap amounts since 1 July 2018 and can be carried forward for up to five years.

Note: to claim a tax deduction, you need to notify your super fund in writing and lodge a ‘Notice of intent’ form. You must also receive an acknowledgement from them.

2. Get more from your salary or a bonus

If you’re an employee, you may be able to arrange for your employer to direct some of your before-tax salary, or a bonus, into your super as a salary sacrifice contribution.

Potentially you’ll pay less tax on this money than if you received it as take-home pay. This is because you’ll only be charged 15% tax rather than your personal tax rate which could be up to 47% (including Medicare Levy).

How it works

Ask your employer if they offer salary sacrifice. If they do, it can be a great way to help grow your super in a tax-effective way.

Note: salary sacrifice amounts count towards your concessional contribution cap which is $27,500 for the 2022-23 financial year—along with any super contributions from your employer and personal contributions you claim as a tax deduction. 

You may be eligible to contribute more than $27,500 without penalty if you didn’t use the whole cap in previous years. This is called catch-up concessional contributions which apply to unused cap amounts since 1 July 2018 and can be carried forward for up to five years.

3. Boost your spouse’s super and reduce your tax

If your spouse isn’t working or earns a low income, you may consider making an after-tax contribution into their super. 

This strategy could potentially benefit both of you as you could qualify for a tax offset of up to $540.

How it works

You may be able to get the full tax offset if you contribute $3,000 and your spouse earns $40,000 or less per year.

A lower tax offset may be available if you contribute less than $3,000, or your spouse earns between $37,000 and $40,000 per year.

This contribution counts towards your spouse’s non-concessional contribution cap.

4. Get a super top-up from the Government

If you earn less than $57,016 per year, and at least 10% is from your job or a business, you could consider making an after-tax super contribution. If you do, the government may make a ‘co-contribution’ of up to $500 into your super account.

How it works

The maximum co-contribution is available if you contribute $1,000 and earn $42,016 per year or less. You may receive a lower amount if you contribute less than $1,000 and/or earn between $ 42,016 and $57,016 per year.

The contribution you make counts towards your non-concessional contribution cap.

5. Convert your savings into super savings

Another way to invest more in your super is by making an additional contribution with some of your after-tax income or savings.

Although these contributions don’t reduce your taxable income for the year, you can still benefit from the low tax rate of up to 15% that’s paid in super on investment earnings. 

This tax rate may be lower than what you’d pay if you held the money in other investments outside super.

How it works

Before you consider this strategy, make sure you’ll stay under your non-concessional contribution cap— which is $110,000 for 2022-23 or potentially up to $330,000—if you meet certain conditions. Penalties apply if you exceed the cap.

Also, to use this strategy in 2022/23, your total super balance must have been under $1.7 million on 30 June 2022.

This article has been prepared by NULIS Nominees (Australia) Limited ABN 80 008 515 633 AFSL 236465 (NULIS) as trustee of the MLC Super Fund ABN 70 732 426 024. NULIS is part of the Insignia Financial group of companies comprising Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (‘Insignia Financial Group’). The information in this article is current as at April 2024 and may be subject to change. This information may constitute general advice. The information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider obtaining independent advice before making any financial decisions based on this information. It is recommended that you consider the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD) before you make any decisions about your superannuation. You can obtain the latest copy of the PDS (or other disclosure documents) and TMD by calling us on 132 652 or by searching for the applicable product at mlc.com.au. You should not rely on this article to determine your personal tax obligations. Please consult a registered tax agent for this purpose. Opinions constitute our judgement at the time of issue. The case study examples (if any) provided in this article have been included for illustrative purposes only and should not be relied upon for decision making. Subject to terms implied by law and which cannot be excluded, neither NULIS nor any member of the Insignia Financial Group accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in the information in this communication.