What's the deal with voluntary super contributions? - Raiz Invest

We’re almost at the end of the 2019/2020 financial year, which means tax returns are back in fashion. Depending on your circumstances, you may be eligible to make voluntary contributions into your super before the years end which could be tax deductible.


Concessional and Non-concessional Contributions

When a contribution is made into your super, it is classed as either concessional or non-concessional.

A concessional contribution is any contribution for which a tax deduction could be claimed for (such as compulsory employer contributions and salary sacrifice amounts), whereas a non-concessional contribution is any contribution made with after tax earnings.

Concessional contributions are taxed 15% upon entry into the super fund, unless your taxable income exceeds $250,000 for the year, in which case the tax rate is 30%. These contributions can be made up to a limit of $25,000 each financial year.

Personal contributions you make with your after-tax income may be able to be claimed as a tax deduction and could count towards your concessional contribution limit.

It should be noted that if you contribute too much money into your super for a financial year, you may have to pay additional tax.


Why do concessional contributions matter?

Suppose you earn $65,000 a year and make a $10,000 concessional contribution into your super. After the contribution is taxed 15%, the net contribution is reduced to $8,500 invested in your super fund assets.

Had you taken that $10,000 out as income and paid 32.5% on tax, you would be left with only $6,750 to invest outside of super.


How do I claim a tax deduction on my after-tax contributions?

In order to claim a tax deduction on personal contributions, you must first provide your notice of intent to your super fund.

There are various ways to give your notice, depending on your super fund. If available, you can use your funds own paper or electronic form. Alternatively the ATO has their own form which you can choose to complete: Notice of intent to claim or vary a deduction for personal super contributions.

Your notice of intent must be given by whichever occurs first of the following:

  • The day you lodge your tax return for the year in which you made the contributions
  • The end of the income year following the one in which you made the contributions

With the financial year ending soon, any voluntary contributions you make with the intention to claim as a tax deduction must be received by the fund by 30 June. Otherwise they would probably count towards the next financial year!

Please check with your tax advisor on how voluntary super contributions may affect you.



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