Types of contributions

There are two main categories of super contributions; concessional and non-concessional.

Concessional (pre-tax)

Superannuation Guarantee contributions	Your employer is required to contribute a minimum of 9% of your gross salary to super. This is known as the Superannuation Guarantee. These contributions are made before any income tax is applied and taxed at 15%¹ when the contribution enters your super account.
Salary sacrifice	Many employers will allow you to contribute to super a regular percentage or one-off payment from your pre-tax income. These contributions are generally taxed at 15%¹, which is less than the average marginal tax rate – making it a great way to boost your super and reduce your current taxable income.
Self-employed contributions	Even if you’re self-employed you can contribute to super. In fact, the taxation rules that apply for these contributions make super an equally good investment for the self-employed¹

Non-concessional (after-tax)

Personal contributions	You can also make your own after-tax contributions to super² While you can’t claim a tax deduction on these contributions, because you will have already paid income tax on this money, no extra tax is added when it’s contributed to super or when taken as a benefit (subject to your preservation age).
Spouse contributions	Contributing to super on behalf of your spouse can be a tax-effective way² for a couple to save for retirement – particularly if your spouse is only working part-time or has a limited income. There is no limit to the amount you can contribute, provided the contributions do not exceed non-concessional contribution limits.
Government co-contributions	If you earn less than $61,920³ a year and make personal contributions to your super, the federal government will match these contributions up to a certain limit. Currently, if you earn up to $31,920³ the government will contribute $1.00 for every dollar you contribute to super, up to $1,000 per year. This amount reduces by a rate of 3.33 cents for every dollar of income you earn over $31,920 - and phases out completely at $61,920.

 

For further information about tax and super visit www.ato.gov.au/super.

¹ Subject to maximum concessional contributions cap of:

• Under 50 years - $25,000 per year (subject to indexation for future years).
• 50 to 74 years - $50,000 per year up until 1 July 2012.

Any contributions above these caps are taxed at the highest marginal tax rate, currently 46.5% (including medicare levy) and will count towards the non-concessional contributions cap.

² Subject to non-concessional contributions cap of:

• No tax payable on first $150,000 per year (subject to indexation for future years, or
• $450,000 over three years (subject to eligibility).

Any contributions above these caps are taxed at the highest marginal tax rate, currently 46.5% (including medicare levy).            

³ For the 2010/11 financial year earnings include reportable fringe benefits, net business income for self employed people, total net investment losses and salary sacrifice superannuation contributions.