We’ve all heard of superannuation - the government-mandated retirement savings program allowing Australians to save money for retirement. But did you know that you can make voluntary contributions to your superannuation? By doing so, you can unlock a more secure and comfortable retirement. Let’s take a closer look at how extra contributions to your super can benefit you.
Benefits of making extra contributions
Making extra contributions to your superannuation is one of the best ways to maximise your retirement savings. It could result in larger savings when it comes time to retire and could have potential tax benefits. Additionally, many employers offer salary sacrifice arrangements that allow you to contribute part (or even all) of your pre-tax salary into your superannuation account. This means any money contributed before tax is taken out will help lower your taxable income and put more cash in your pocket throughout the year.
Extra contributions also unlock additional rewards from the government. For example, suppose you are eligible for the Government Co-Contribution scheme. In that case, any extra contribution made into your account before June 30th each year will qualify for co-contribution payments up to $500 from the government, depending on how much was contributed and your income.
Voluntary contributions offer many advantages beyond simply increasing total savings upon retirement. You are also investing more in the tax-effective superannuation environment, where investment earnings are taxed at a maximum of 15%. The compounded benefit of this concessional tax treatment can give you a higher balance in retirement and, therefore a higher retirement income.
The difference between concessional contributions and non-concessional
You can make two types of contributions to your super fund: concessional and non-concessional contributions.
Concessional contributions: These are considered pre-tax contributions, designed to boost your super balance while also reducing your personal income tax. Concessional contributions include the superannuation guarantee that your employer pays into your super, including any salary sacrifice amounts and any personal contributions for which you claim a tax deduction.
Non-concessional contributions: Salary sacrifice contributions and personal contributions for which you claim a tax deduction can both be used to reduce your taxable income. With salary sacrificing, you arrange with your employer to reduce your pre-tax salary in exchange for increased contributions into your super fund. Note that only employees may be eligible to enter into a salary-sacrificing arrangement. However, whether you are an employee or self-employed, you can make personal contributions directly to your super fund from your after-tax income, e.g. from your bank account, up to your concessional contributions cap and claim a tax deduction, provided that you are eligible, and notify your super fund that you wish to claim a tax deduction and receive an acknowledgement back from them.
Non-concessional contributions are considered after-tax contributions, designed purely to increase your super balance. These voluntary personal contributions include those you make directly to your super fund from your after-tax income, e.g. from your bank account, which you do not claim a tax deduction for, and count towards your non-concessional contributions cap.
We will make your Grow My Money payments as non-concessional contributions however, whether your cashback contributions are treated as concessional or non-concessional may depend on your personal circumstances, so you will need to seek your own financial advice. You can also find more information here.
With careful planning and knowledge of all available options, anyone can take advantage of these opportunities and enjoy a more comfortable retirement – so why not start right now?
How Grow My Money can help
Grow My Money makes adding extra contributions to your superannuation (or your mortgage) easy. Our program provides Australians with a simple way to put more money aside for retirement without sacrificing other parts of their budget. With over 1000+ participating retailers, exclusive deals, and up to 15% cashback going straight into your nominated super fund account, you can easily make extra contributions towards your retirement.
5 great ways to earn cashback
You can grow your superannuation (or pay down your mortgage) with Grow My Money in 5 ways:
- Download the Grow My Money app from Google Play or Apple Store.
- Shop 500+ brands directly from the Grow My Money website.
- Add the Grow My Money extension to your Chrome or Safari browser.
- Use your linked card and shop online at participating card-linking retailers.
- Use your linked card when you buy in-store at participating retailers.
Signing up for Grow My Money is free, and there are no ongoing charges. You can still buy items on sale and earn Grow My Money. If that brand has its own points system, you can still earn those, too. So, it’s a win-win for all. Sign up today to get started on your financial future.
This blog contains general advice only and does not take account of an individual’s objectives, financial situation or needs. Before acting on this general advice, individuals need to consider its appropriateness having regard to their objectives, financial situation or needs and should seek their own independent advice.