Why would you contribute money to your super when you might not see it until you retire?
It turns out there are three BIG reasons.
In a cost of living crisis, contributing extra money into your super might not be top of mind.
But as it happens, there are three good reasons why now might be the perfect time to consider it.
In fact, your super could help you with your home deposit, help you get a bigger tax refund, and help you get extra government support.
Here’s the tl:dr.
1. Your super can help you save for a house
It’s called the First Home Super Saver scheme, and the gist is that you save money toward your first home deposit in your super fund instead of in a bank account.
You get tax savings, associated earnings, and the chance to lock up your home deposit until you’re ready to withdraw it.
You can make up to $15,000 of eligible contributions each financial year, and withdraw up to $50,000 of them when you’re ready to pay your deposit.
Eligible contributions include salary sacrificed contributions, or direct deposits paid into your super fund, which you can also claim tax on, as well as after-tax contributions you make that you don’t claim a tax deduction on.
You should only consider this if you’re committed to buying a home - you generally won’t be able to withdraw your contributions until you reach preservation age, otherwise. There are annual limits to how much you can contribute, and the types of contributions you can make.
Interested? Check out our First Home hub, which also includes other support you may be able to access based on your state.
2. Your super can help you get a boost from the government
If you’re a low or middle-income earner and your income will total less than $58,445 this financial year (ending 30 June, 2024), the government may contribute extra money to your super as long as you do, first.
For every year you’re eligible, the government may contribute up to $500 extra to your super, depending on how much you earn, and how much extra you contribute.
Interested? Here’s some more info on the super co-contribution scheme, right here on Spaceship Learn.
3. Your super can help you to pay less tax
If you want to pay less tax, consider making extra super payments to your fund. Generally, contributions to your super are taxed 15%, and once you pass the tax-free threshold, your income may be taxed anywhere from 19% to 45%.
So, by contributing extra to your super, the general idea is that you get back the difference, either before you get your paycheck, through salary sacrifice; or afterward, when you submit your tax return.
It can get a little bit tricky so we recommend getting personal financial advice from a licensed financial professional such as a financial planner or accountant.
Keep in mind
Apart from the FHSS, you generally can’t access any extra super you contribute until you reach preservation age, which is 60 years old if you’re born after 1 July 1964.
So make sure these moves are right for you before making them.
Tax and super can get tricky, so be sure to seek professional financial help if you’re unsure. This might include a licensed accountant or financial planner. MoneySmart has some ideas about where to start if you’re unsure.
So... how do you actually make extra super contributions?
Once you’ve done your research and decided it’s the right move for you, there are a few different ways you can make additional contributions. Here are some of them.
1. Set up salary sacrifice
If your employer allows it, you can ask them to add more than the super guarantee (the amount of super they must pay you by law) to your super fund.
People do this because even though extra contributions sit in their super fund and can reduce their take home pay, they still get to keep more of it.
You can generally talk to your payroll or HR department to set it up.
2. Make a personal contribution
You can generally set up a direct deposit or BPAY from your bank account to your super fund. Contact them to find out how. Spaceship Super customers can set up BPAY payments right from the Spaceship app.
3. Get your spouse to contribute
If your spouse makes a contribution to your super, you may be entitled to a tax offset, which is also known as a tax rebate. The contribution will still count toward your spouse’s concessional cap, however.
Conversely, if your spouse has an income of $40,000 or less, you may be able to claim a tax offset of up to $540 if you contribute to their super.
For more rules about spousal contributions, check out the ATO.
For more information on super, you can visit the ATO website’s Super for individuals and families collection.
