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Superannuation: Top-up time

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Cite as: April 2014 88 (04) LIJ, p.81

Tax concessions from superannuation are substantial and should not be missed.

As 30 June approaches, it is timely to think about topping up your superannuation. There are two ways you can top up your super that take advantage of the tax concessions from contributions you pay.

Concessional contributions

The two most common types of concessional contributions are:

  • employer contributions (including the superannuation guarantee and salary sacrifice contributions); and
  • personal contributions (paid by a member where a valid tax deduction notice has been acknowledged by the super fund).

Concessional contributions are tax deductible to the employer/member who paid the contribution. They are taxable on receipt by a complying super fund at a concessional rate of 15 per cent.

By way of example, a $100 concessional contribution has $15 of tax deducted (some funds will also provide a deduction for administration fees the super fund charges) and the net amount of $85 is applied to the member’s super fund account. In most cases the concessional 15 per cent tax rate compares very favourably with the individual’s marginal tax rate (which can be as high as 45 per cent).

Since 1 July 2007 contribution caps have applied. Contributions paid in excess of these caps are subject to tax at higher rates.

The current contribution caps for the 2013/14 financial year are:

  • if you are under 60, your concessional contributions can be up to $25,000.
  • the higher cap of $35,000 applies if you were 59 or over at 30 June 2013.
Non-concessional contributions

A non-concessional contribution is generally one where no tax deduction is claimed by the payer of the contribution. Such contributions are also not subject to tax when received by a complying super fund.

The most common type of non-concessional contribution are personal contributions such as those paid by a member from cash in their bank account to their super fund.

Once again, you need to be careful where the contribution caps apply.

The non-concessional contributions cap is $150,000 (subject to meeting a work test).

Individuals aged 63 or 64 during the 2013/14 financial year may use the bring-forward rule regardless of their plans for future employment. (A bring-forward rule enables you to bring forward two years of entitlements, allowing a contribution of up to $450,000 for that income year.)

Other tax advantages of super

Net investment earnings and capital gains on your super are taxed at a concessional rate of up to 15 per cent. Again this is likely to be lower than your marginal tax rate. If your fund has invested in Australian shares you may also get the benefit of imputation credits attached to dividends received in respect of your investment.

From age 55 you can establish a pension account with your accumulated super. No tax applies on the investment earnings in respect of pension assets.

Once you reach age 60, any withdrawals from your super fund (either lump sum or pension payment) are free from tax.

These are significant tax benefits that other investments do not enjoy. These concessions exist to encourage Australians to save via superannuation.

Projecting your final benefit

You should periodically check how much you have accumulated and whether you are on track to accumulating sufficient savings to fund the standard of living you want in retirement.

There are a range of tools available to help you.

One example is the website of the Australian Securities & Investment Commission – Moneysmart, which includes a number of helpful calculators.

Like most super funds, legalsuper also has a range of calculators on its website which is available to both members and the general public.

If you are short of time, you might want to cut to the chase and simply speak to a client service representative from your super fund. Legalsuper regularly meets one on one with members or conducts workplace seminars to explain superannuation and how it works. Should you wish to make an appointment call Stephanie Hart on 03 9602 0107.

As the end of another financial year approaches, it is timely to understand the different ways you can boost your super and maximise the benefits of tax concessions afforded to super.

ANDREW PROEBSTL is chief executive of legalsuper, Australia’s industry super fund for the legal profession. He can be contacted on 03 9602 0101 or via


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