When you retire, your Super is the money you will have to fund your retirement lifestyle. This accumulated money becomes your pension and you receive this tax free.
The Government allows you to make concessional contributions up to the Concessional contribution cap which, from 1 July 2017 is $25,000 for all ages. This amount incorporates your employer SGC contributions and Salary sacrifice to superannuation contributions
Once your total contributions exceed the above amount, depending on your age, the Super surcharge will be 49% rather than the concession charge of only 15%.
Presently, there are many ways of contributing towards your Super:
Your Employer contributes a % of your Gross Wage (SGC) into your chosen Super Fund. Presently it is 9.5% . Once your Super Fund receives these payments, they withhold 15% (called Contributions Tax) and pays this to the Federal Government.
When you Salary Sacrifice, you nominate an amount to be paid into your Super Fund each pay from you PRE-TAX gross wage. Your Employer reduces your taxable income by this amount and you only pay tax on the remaining. Once your Super Contribution reaches your Super Fund, it taxes the amount at 15%. So if your marginal tax rate is 34.5%, you save 19.5% tax, which is 34.5% less 15%.
From 1 July 2017 if your Spouse earns less than $37,000 of adjusted taxable income, you can contribute any amount of ‘after tax’ dollars into their super fund and $3,000 of the contribution will qualify for a tax offset of 18% up to $540.
From 1 July 2017 after tax non concessional contributions limit has been reduced to $100,000 per annum. Payments of $300,000 over a three year period are allowed.
Once your existing Super Fund reaches a significant amount, you can operate your own Self-Managed Super Fund (SMSF) by 'rolling over' your existing Funds and operating the Fund yourself. When you sell an Asset, if your SMSF owns it for more than 1 year, the profit is taxed with a 33.33% concession, meaning your SMSF pays 66.67% x 15% = 10% tax on capital gains.
If you are self employed, any amount you contribute to your Super Fund is a tax deduction at marginal tax rates. Remember that once the amount enters your Super Fund, it pays 15% tax on it, whilst you can save a lot more by claiming a tax deduction at a higher marginal rate, similar to the Salary Sacrifice example above.