There are generally two types of superannuation contributions: concessional and non-concessional.

Concessional contributions are those paid by an employer. These are called concessional contributions because they are taxed at 15% inside the fund. If you work for someone else, your employer pays the equivalent of 9% of your salary into your super fund account. This is set to gradually increase to 12%.

Non-concessional contributions are generally personal superannuation contributions made by you for yourself or on behalf of someone else, such as your spouse. These are also known as after-tax contributions and they are not taxed in your fund.

As life expectancies increase, the amount of money we need to fund our retirement also increases, and making personal super contributions can help your retirement income stretch further.

This is one of the key reasons why making personal superannuation contributions are a good idea. But there are others, and these include:

• Tax benefits.
• Better standard of living in retirement.
• More money to invest for the long term.
• Possible eligibility for government co-contribution.

Age and personal contributions

Age plays an important role in determining whether a personal contribution can be made and how much your fund can accept.

Under 65: Contributions can be accepted regardless of the member’s working status.

Age 65-74: Employer and personal contributions can be accepted, provided you work for at least 40 hours during a consecutive 30-day period that financial year.

75 and over: Only mandated employer contributions under an industrial award or agreement can be made. No other contributions can be made. The Government has announced it will change this rule to allow normal employer superannuation guarantee contributions, with effect from 1 July 2013.

When making personal contributions, make sure to stay within your contributions limit. In the 2011/12 financial year, the non-concessional contributions cap is $150,000. If you breach this cap, you will be slapped with a painful tax liability of 46.5% on the excess, and this is not a very tax effective way of saving.

You can find out more about DIY super contributions on the Switzer Super Report website, or sign up for a 21-day FREE trial of the Switzer Super Report, Australia’s leading investment newsletter and website for DIY super trustees.

 

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Anyone should, before acting, consider the appropriateness of the information in regards to their objectives, financial situation and needs and, if necessary, seek professional advice.