For most people, your super is going to be the main funding vehicle for retirement savings. As you work, your employer contributes to your super with the intent of the money growing. Your superannuation will be there when you decide to stop working and live the life of a retiree. But while you may know you have a super, you may not know a lot more outside of what it’s intended to do. Today we’re going to dive into a little more information about superannuation; specifically the contribution limits.
One of the best and easiest ways to have additional money for retirement is through a salary sacrifice. A salary sacrifice is where you elect to have a certain amount of money withheld from your salary pre-tax. This amount is then contributed to your super fund. This sacrifice is above what your normal required contribution is.
For salary sacrifices, here are the superannuation contribution limits:
- $30,000 per year if you’re under the age of 50
- $35,000 per year for those who are over the age of 50
- If you earn less than $37,000 per year, the government will contribute an extra $500 towards your super.
Paying your salary sacrifice before taxes are taken out will see you taxed at the rate of 15%. If you go over the contribution limit, the tax amount skyrockets to 31.5%. This is why it’s important to stay within the cap.
If you want to contribute more than $30,000 or $35,000 per year depending on age, you can elect to have the contributions made after tax. If you choose this option, you can contribute up to an extra $100,000 per year as of 1, July 2017. While this gives you the option to contribute more, your salary tax will not be reduced and if you go over the cap, the taxation rate is 49%.
As you can see, a salary sacrifice can help you save substantially more money for retirement, but there are guidelines to stay within. If you need help or have questions regarding the superannuation contribution caps, a professional and qualified financial planner can help you choose the best option for your specific situation.