When it comes to building a retirement fund, most Australians rely on their superannuation contributions to help them financially as they retire. But the key here is knowing how much you put into your super each year to help you maximise your contributions.
You always have to keep an eye on superannuation rules because they change every year. This means that contribution caps and various thresholds may differ from the previous year. Knowing this is important, whether you’re putting in a lump sum contribution or you’re making regular contributions since the limits will change.
For this reason, it’s best to speak to a credible financial planner to see when it’s most beneficial to add contributions to your superannuation. This way, you get to grow your money better and even get tax-effective solutions too.
Putting a Lump Sum in Your Super in 2021/2022
There are two types of superannuation contributions: concessional contributions and non-concessional contributions.
Concessional contributions include your Employer Super Guarantee, Salary Sacrifice and Personal Concessional contributions. This type is called concessional because the contributor will receive a tax deduction for contributing to their super.
On the other hand, non-concessional contributions are after-tax contributions paid from your bank account into your super. This is where tax deductions are not claimed during contribution, but instead, these contributions are made with after-tax savings.
Although there are two types of contributions, both have annual caps and limits the amount you can contribute to your account each financial year.
Changes that Happen to Your Super At Retirement
The cap for concessional contributions is currently at $27,500 every financial year for everyone. However, the exception is if you have a superannuation balance or combined balances less than $500,0000. If that’s the case, you can utilise carry-forward unused concessional contributions and use your unused cap from the previous year.
As for non-concessional contributions, the limit is $110,000 every financial year, and the exception is if you’re under the age of 65, you can use the bring-forward rule. This means that you can bring forward up to two years worth of caps so you can contribute up to $330,000 for three financial years.
Since exceeding your cap can contribute to more taxes, it’s best to seek advice from a financial planner to ensure that you’re taking the right steps to maximise your superannuation contributions.
Superannuation Work Test Changes
To make or receive any type of contribution to your account when you’re over 67, you need to meet the Superannuation Work Test. This means that you’ll need to complete 40 hours of paid work over a 30 day period so you can continue to make contributions.
But retirees aged 67 to 74 with $300,000 or less in their super balance can make voluntary concessional and non-concessional contributions for the first financial year that they don’t pass the Superannuation Work Test.
The Bottom Line: Speak to a Financial Planner to Ensure You’re Maximising Your Superannuation Contributions
Having a stable and secure retirement is what we all want, and to do this, you need to understand the inner workings of your superannuation. When you know the most effective times to contribute and how to use effective strategies to improve tax-related contributions in your super, you’ll get to reap the rewards now and in retirement.
Of course, you can only do this if you work with a credible financial planner since they can help you maximise all areas of your superannuation.
Sydney Wealth Advisers has some of the best financial advisers and financial planners in Sydney. Our team of experts work closely with their clients to create suitable superannuation strategies that offer peace of mind to have the financial lifestyle they desire.
Contact us to learn more about how we can help you today!
Disclaimer: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Coastal Advice Port Macquarie, and Sydney Wealth Advisers are subsidiaries of Coastal Advice Group which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429