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Working out how best to grow your super nest egg can be confusing and selecting the right mix of concessional and non-concessional contributions makes things even tougher.
To help get you thinking about which mix of contributions could work best for you, SuperGuide has created some case studies for typical Aussies of different ages, income levels and work situations in 2020/21.
The case studies show how using different super contributions can make a significant difference to your take-home pay, super balance – and possibly your tax bill.
How do I work out my best mix of super contributions?
Fortunately, there are some nifty tools around to help point you in the right direction when it comes to making super contributions.
One of the best is available on the Australian Securities and Investment Commission (ASIC) website – and best of all, it’s free. (And it’s the tool we used to work out our case studies.)
To use ASIC’s Super Contributions Optimiser, simply enter the necessary information about your age, income and super contributions. The calculator assumes your employer contributes an amount equal to 9.5% of your ordinary times earnings (OTE) into your super account, but if your employer contributes more than the required SG minimum, simply increase the percentage amount.
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The calculator is regularly updated to reflect the annual taxation rates applying to your salary for the current financial year.
If you are self-employed, reduce your amount of employer contributions to 0% and enter your contributions amounts as additional voluntary or personal contributions.
The purpose of the ASIC calculator is to show the combination of super contributions giving you the biggest increase in your super for a given reduction in your take-home pay in the current financial year.
Unfortunately, the contribution calculator does not work for members of defined benefit super funds, as these super funds use fund-specific formulas to work out the super benefits for their member.
What types of super contributions can I make?
Before checking out the ASIC calculator, here’s a quick overview of the main types of super contributions, plus some links to SuperGuide articles explaining things in more detail if you want to refresh your memory:
1. Concessional (before-tax) contributions
These contributions are made from your income before you pay income tax.
There is a 15% contributions tax payable on these contributions when they are added to your super account and the total amount of your concessional contributions must not exceed the annual cap or limit ($25,000 in 2020/21).
The main types of concessional contributions are:
- Your employer’s Super Guarantee (SG) contributions
- Award and additional employer contributions
- Salary-sacrifice contributions
- Personal contributions for which you claim a tax deduction.
2. Non-concessional (after-tax) contributions
These super contributions are made from your income after you pay income tax.
There is no 15% contributions tax payable on these contributions as you have already paid tax on the money. Your total contributions must not exceed the annual cap ($100,000 in 2020/21).
The main types of non-concessional contributions are:
- Personal contributions from your tax-home pay
- Spouse contributions
3. Government contributions into your super account
These contributions are made by the government directly into your super account if you meet the eligibility criteria and they can provide a useful boost to your super account (see following case studies):
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- Co-contributions
- Low income super tax offset (LISTO)
SuperGuide case studies: How to mix and match your super contributions
The following case studies show how using a variety of super contributions can substantially boost the amount in your super account.
Obviously, using a different mix of contributions or a higher/lower contribution amount from your salary will give different results. In many cases, making certain types of super contributions (such as using a salary-sacrifice arrangement) can also lower your annual tax bill.
Pay for Min ($ per annum)
| With super contributions | No super contributions | |
|---|---|---|
| Gross salary | $26,600 | $26,600 |
| Less salary sacrifice | -$5,654 | $0 |
| Less income tax + Medicare levy | -$57 | -$1,276 |
| Take-home pay | $20,946 | $25,324 |
| Less after-tax super contributions | -$822 | $0 |
| Net pay | $20,124 | $25,324 |
Min’s super ($ per annum)
| With super contributions | No super contributions | |
|---|---|---|
| Employer contributions | $2,527 | $2,527 |
| Before-tax contributions (salary sacrifice) | $5,654 | $0 |
| After-tax contributions | $822 | $0 |
| Government co-contribution | $411 | $0 |
| Low income super contribution | $500 | $379 |
| Less contributions tax | -$1,226 | -$379 |
| Net contributions | $8,687 | $2,527 |
Source: Author using ASIC Super Contributions Optimiser calculator
Pay for Jason and Leigh-Anne ($ per annum)
| With super contributions | No super contributions | |||
|---|---|---|---|---|
| Jason | Leigh-Anne | Combined | Combined | |
| Gross salary | $72,000 | $35,000 | $107,000 | $107,000 |
| Less salary sacrifice | -$6,437 | $0 | -$6,437 | $0 |
| Less income tax + Medicare levy | $13,070 | $3,192 | $16,262 | $18,499 |
| Take-home pay | $52,493 | $31,808 | $84,301 | $88,501 |
| Less after-tax contributions | $0 | -$1,000 | -$1,000 | $0 |
| Net pay | $51,493 | $30,808 | $83,301 | $88,501 |
Jason and Leigh-Anne’s super ($ per annum)
| With super contributions | No super contributions | |||
|---|---|---|---|---|
| Jason | Leigh-Anne | Combined | Combined | |
| Employer contributions | $6,840 | $3,325 | $10,165 | $10,165 |
| Before-tax contributions (salary sacrifice) | $6,437 | $0 | $6,437 | $0 |
| After-tax contributions | $0 | $1,000 | $1,000 | $0 |
| Government co-contribution | $0 | $500 | $500 | $0 |
| Low income super contribution | $0 | $499 | $499 | $499 |
| Less contributions tax | -$1,992 | -$499 | -$2,490 | -$1,525 |
| Net contributions | $11,286 | $4,825 | $16,111 | $9,139 |
Source: Author using ASIC Super Contributions Optimiser calculator
Pay for Nasir ($ per annum)
| With super contributions | No super contributions | |
|---|---|---|
| Gross salary | $176,000 | $176,000 |
| Less salary sacrifice | -$8,280 | $0 |
| Less income tax + Medicare levy | -$52,908 | -$56,137 |
| Take-home pay | $114,812 | $119,863 |
| Less after-tax contributions | -$64,949 | $0 |
| Net pay | $49,863 | $119,863 |
Nasir’s super ($ per annum)
| With super contributions | No super contributions | |
|---|---|---|
| Employer contributions | $16,270 | $16,270 |
| Before-tax contributions (salary sacrifice) | $8,280 | $0 |
| After-tax contributions | $64,949 | $0 |
| Government co-contribution | $0 | $0 |
| Low income super contribution | $0 | $0 |
| Less contributions tax | -$3,750 | -$2,508 |
| Net contributions | $86,199 | $14,212 |
Source: Author using ASIC Super Contributions Optimiser calculator
Case study 4: Nearing retirement
Robert is aged 60 and is in his final few years of employment as a mid-level manager with a large corporation on an annual salary of $65,000. His wife Carlene is aged 58 and works part time as a dental assistant earning $25,000 a year. Their employers are making the normal SG contribution of 9.5% into their super accounts.
As they have paid off their mortgage and their two children have left home, Robert and Carlene feel they could spare around $3,000 from their combined monthly take-home pay of $6,360 to add to their super accounts.
To get the biggest boost to their super, Robert should consider making $1,569 a month in salary-sacrifice contributions and $1,442 per month as a non-concessional (after-tax) contribution. Carlene could then make a $567 per month salary-sacrifice contribution and a $83 per month non-concessional contribution.
Pay for Robert and Carlene ($ per annum)
| With super contributions | No super contributions | |||
|---|---|---|---|---|
| Robert | Carlene | Combined | Combined | |
| Gross salary | $65,000 | $25,000 | $90,000 | $90,000 |
| Less salary sacrifice | -$18,825 | -$6,800 | $25,625 | $0 |
| Less income tax + Medicare levy | -$6,227 | $0 | $6,227 | $13,679 |
| Take-home pay | $39,948 | $18,200 | $57,148 | $76,321 |
| Less after-tax contributions | -$16,827 | -$1,000 | -$17,827 | $0 |
| Net pay | $23,121 | $17,200 | $40,321 | $76,321 |
Robert and Carlene’s super ($ per annum)
| With super contributions | No super contributions | |||
|---|---|---|---|---|
| Robert | Carlene | Combined | Combined | |
| Employer contributions | $6,175 | $2,375 | $8,550 | $8,550 |
| Before-tax (salary sacrifice) contributions | $18,825 | $6,800 | $25,625 | $0 |
| After-tax contributions | $16,827 | $1,000 | $17,827 | $0 |
| Government co-contribution | $0 | $500 | $500 | $0 |
| Low income super contribution | $0 | $500 | $500 | $356 |
| Less contributions tax | -$3,750 | -$1,376 | -$5,126 | -$1,283 |
| Net contributions | $38,077 | $9,799 | $47,876 | $7,624 |
Source: Author using ASIC Super Contributions Optimiser calculator
Pay for Arjun and Prisha ($ per annum)
| With super contributions | No super contributions | |||
|---|---|---|---|---|
| Arjun | Prisha | Combined | Combined | |
| Gross salary | $78,000 | $13,000 | $91,000 | $91,000 |
| Less salary sacrifice | -$17,590 | $0 | -$17,590 | $0 |
| Less income tax + Medicare levy | -$11,215 | $0 | -$11,215 | $17,377 |
| Take-home pay | $49,195 | $13,000 | $62,195 | $73,623 |
| Less after-tax contributions | -$25,572 | -$1,000 | -$26,572 | $0 |
| Net pay | $22,623 | $12,000 | $35,623 | $73,623 |
Arjun and Prisha’s super ($ per annum)
| With super contributions | No super contributions | |||
|---|---|---|---|---|
| Arjun | Prisha | Combined | Combined | |
| Employer contributions | $7,410 | $1,235 | $8,645 | $8,645 |
| Before-tax contributions (salary sacrifice) | $17,590 | $0 | $17,590 | $0 |
| After-tax contributions | $25,572 | $1,000 | $26,572 | $0 |
| Government co-contribution | $0 | $500 | $500 | $0 |
| Low income super contribution | $0 | $185 | $185 | $185 |
| Less contributions tax | -$3,750 | -$185 | -$3,935 | -$1,297 |
| Net contributions | $46,822 | $2,735 | $49,557 | $7,534 |
Source: Author using ASIC Super Contributions Optimiser calculator
