Types of Superannuation contributions
Superannuation is a long-term savings scheme designed to help Australians save for retirement. It is a tax-effective way to save money, and there are a number of different types of super contributions that you can make.
Concessional contributions
Concessional contributions may be taxed at a lower rate than your income tax rate, and you may be able to claim a tax deduction for them. This makes them a very tax-effective way to save for retirement.
There are several different types of concessional contributions, including:
· Employer super guarantee (SG) contributions: Your employer is required to pay at least 11% of your ordinary time earnings into your super fund, if you are eligible.
· Salary sacrifice: You can agree with your employer to have part of your pre-tax salary paid into your super fund. This is a great way to boost your super balance and reduce your taxable income.
· Personal contributions: You can make personal contributions to your super fund from your own after-tax income. You may be able to claim a tax deduction for these contributions, depending on your income and age.
· Government co-contributions: The government may co-contribute to your super if you make personal contributions and meet certain eligibility criteria.
Non-concessional contributions
Non-concessional contributions are taxed at a higher rate than concessional contributions, and you cannot claim a tax deduction for them. However, they can still be a good way to boost your super balance, particularly if you are older and have a high income.
There are a number of different types of non-concessional contributions, including:
· Personal contributions: You can make personal contributions to your super fund from your own after-tax income, up to a certain limit each year.
· Spouse contributions: You can make contributions to your spouse's super fund, up to a certain limit each year.
· Downsizer contributions: If you are aged 65 or over and sell your main residence, you may be able to make a downsizer contribution to your super fund.
Choosing the right type of super contribution
The best type of super contribution for you will depend on your individual circumstances. If you are unsure which type of contribution to make, you should speak to a financial advisor or financial adviser.
Here are some things to consider when choosing the right type of super contribution:
· Your income tax rate: If you have a high income tax rate, you may benefit from making concessional contributions.
· Your age: If you are older and closer to retirement, you may want to consider making non-concessional contributions to boost your super balance.
· Your superannuation balance: If you have a low superannuation balance, you may want to focus on making concessional contributions.
· Your financial goals: If you have specific financial goals for retirement, such as buying a home or traveling the world, you may want to consider making additional contributions to your super fund.
No matter what type of super contribution you choose, it is important to start saving for retirement early. The earlier you start saving, the more time your money has to grow. When making contributions it is always best to seek professional financial advice.