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We talk to a lot of clients about the best strategies to maximise their superannuation balance prior to retirement. The more money you have in super when you retire, the more choice you have about your retirement lifestyle. At present, you and your partner (if applicable) can each have $1.7m in pension phase at retirement and pay zero tax on earnings and zero tax on capital growth. In addition, the income you draw from this pension is tax free. Sounds great, but due to contribution limits, early planning is essential to reach this balance.

With the end of the 2021-22 financial year fast approaching, we thought we would outline strategies to top up your superannuation balance before 30 June to help boost your retirement savings and potentially save on tax.

Contribute into super and claim a tax deduction

By contributing some of your after-tax income or personal savings into super, you may be eligible to claim a tax deduction. The contribution is generally taxed at up to 15% in the fund (or up to 30% if you earn $250,000 or more). Depending on your circumstances, this could potentially be at a lower rate than your marginal tax rate.

The concessional contribution cap (including employer contributions) is $27,500 for the 2021-22 financial year. Any contributions you make above this limit may attract additional tax.

You may be able to contribute more than the standard concessional contribution cap if you have unused concessional contributions accrued from 1 July 2018 and have less than $500,000 in total super balance on 30 June 2021.

Consider making a one-off super contribution

After-tax (or non-concessional) super contributions are made with money you’ve already paid income tax on such as personal savings. They are contributions you won’t be claiming a tax deduction for.

Contributing to super can be a tax effective strategy as earnings for investments held within super are taxed at up to 15%. This can compare favourably to investment earnings earnt outside super which are taxed at your marginal tax rate.

The annual limit for after-tax contributions is currently $110,000, provided your total super balance is below $1.7 million at the start of the financial year. In some circumstances, you can bring forward three years of after-tax contributions into one year.

Get a super top-up from the Government

To encourage low-income earnings to grow their retirement savings, adding to your super with after-tax money could entitle you to a government co-contribution of $500 if you earn less than $41,112 and are aged below 71 on 30 June 2022. You must also have a total superannuation balance of less than $1.7 million at the start of the financial year.

Boost your spouse’s super and claim a tax offset for yourself

If your spouse or partner’s assessable income is less than $40,000 in a financial year, you can make super contributions on their behalf and potentially claim a tax offset for yourself.

For spouses or partners who earn less than $37,000, the maximum tax offset is $540 in the 2021-22 financial year. This amount gradually reduces to zero if they earn over $40,000 in a year.

All of these strategies are great ways to boost your, or your partner’s, superannuation balance. Remember, once you’ve put money into your super fund, you won’t be able to access it until you reach preservation age or meet another 'condition of release'.

WLM can help

Don’t have a plan? WLM is here to help you to secure your financial future. If you’d like help with setting your financial goals or any further information, please contact us today.

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.