When it comes to your goals, years later you’ll be glad you started today. And there could be benefits to topping up your super now. When you add a little more to your super from your before-tax pay, you could end up paying less tax.
Benefits for now and later
Putting extra into your super from your before-tax pay could:
- Reduce your taxable income – with some of your pay going into your super, you’ll lower your taxable income, which could mean less tax.
- Pay less tax on investment earnings – earnings on your super are taxed at a maximum of 15%, whereas earnings on personal investments outside of super are taxed at your personal income tax rate. This can be as high as 45%.
And because super’s for when you retire, what you do today could have long-term perks.
What are before-tax contributions?
Any money put into your super from your pay before tax is known as before-tax contributions.
These could be compulsory contributions which your employer pays, or salary sacrifice which are additional payments into your super that you might choose to make.
You can generally set up salary sacrifice through your HR or Payroll team at work. And you can choose from a one-off payment, such as a bonus, or an ongoing amount from each pay.
Can I check how I’m tracking against the caps?
If you’re an AMP customer you can login to My AMP at any time to check the total contributions in your AMP super account.
You can also set up notifications in My AMP to let you know when you’re getting close to the limit on your AMP super account. Remember the cap applies to all before-tax contributions made in a financial year across all super accounts you may have.
If your super fund is with another provider, you can likely gain access to that information by logging in to their portal.
Things to consider
Everyone’s different, so if you’re thinking about adding a little more to your super before tax, consider your circumstances and whether this is right for you.
- There are other ways you can boost your super. These include making contributions after tax and if you have a partner, you can make spouse contributions on their behalf (which may attract tax benefits for you).
- If you exceed the super cap limits, additional tax and penalties may apply.
- The value of your investment in super can go up and down. So make sure you understand and are comfortable with any risks, including those of your investment option.
- The government sets general rules about when you can access your super. Generally you can access it when you’ve retired and reached your preservation age, which will be between the ages of 55 and 60 depending on when you were born.
Important information
Source: AMP
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