Boosting retirement savings with super contributions

Natalie Conroy
Mar 11, 2022
minute read

Whether you dream of retiring and travelling the world, caravanning around Australia, or pottering in the garden, the question remains the same for the vast majority of us: “How much money will I need in retirement?”

Of course, everyone has different financial situations, goals, objectives—this is coupled with differing ideas and expectations, particularly around retirement in the post-work years.

Though, as a guide, the ASFA Retirement Standard provides general and itemised information on the minimum annual cost of a comfortable or modest standard of living in retirement for singles and couples in their post-work years.

ASFA regularly reviews these figures and updates them quarterly in line with inflation. According to ASFA’s latest September 2021 Quarter release, for retirees who own their own home, the minimum annual cost of a comfortable retirement is estimated at:

  • $45,239 (for singles aged 67-84 years) and $42,846 (for singles aged 85+ years).
  • $63,799 (for couples aged 67-84 years) and $59,389 (for couples aged 85+ years).

In terms of the lump sum savings required to generate the above figures, this is estimated as being $545,000 (for singles) and $640,000 (for couples). Please note: This assumes a partial Age Pension entitlement.

On this point, the Government’s Retirement Income Review* highlighted that our super—and subsequent retirement income (and outcome)—can be boosted by, among other things, increasing our super contributions.

Given this, below is a brief overview of boosting retirement savings (as a single or couple) with contributions. Please note: Existing rules relating to contribution eligibility may affect your ability to leverage any of the below. In addition, it’s important to consider their appropriateness in relation to your personal circumstances.

1. Mandatory employer contributions—boost to super via employer input

Mandatory employer contributions encompass both Super Guarantee contributions and employer contributions required under a particular award or certified agreement.

Importantly, most employees receive employer Super Guarantee contributions, which is currently set at 10% of their ordinary time earnings base—up to the maximum super contributions base.

Super Guarantee contributions fall under the concessional contribution type (and relevant limits). A concessional contribution refers to a contribution that can be claimed as a tax deduction by the contributor.

Please note: For the 2021-22 financial year, the annual concessional contributions cap limit is $27,500. However, the carry-forward provision allows an individual to carry-forward unused concessional contributions cap amounts on a rolling basis for a period of up to five years.

2. Voluntary employer contributions — boost to super via employer (and individual) input

Voluntary employer contributions include salary sacrifice contributions.

In broad terms, salary sacrificing involves an individual having some of their pre-tax salary contributed to super.

Importantly, to commence salary sacrificing to super, an arrangement needs to be first established between an employee and their employer. Importantly, this arrangement is forward-looking, not retrospective.

Salary sacrifice contributions fall under the concessional contribution type (and relevant limits). Please refer to the mandatory employer contributions section above for further details.


3. Personal contributions—boost to super via individual (and potential Government) input

Personal contributions include non-concessional contributions, personal deductible contributions, and small business CGT contributions.

Non-concessional contributions

A non-concessional contribution refers to an after-tax contribution that isn’t (or can’t be) claimed as a tax deduction by the contributor.

Please note: For the 2021-22 financial year, the annual non-concessional contributions cap limit is $110,000 per annum, and the maximum that can be contributed in one financial year by bringing forward the caps of the next two financial years (the bring-forward rule) is currently $330,000.

Importantly, if an individual makes a non-concessional contribution to their super and has total income less than $56,112, they may be eligible to receive an additional boost via the Government co-contribution (up to $500).

Personal deductible contributions

Unlike salary sacrifice contributions, personal deductible contributions don’t require an arrangement between an employee and their employer. However, among other things, an individual’s after-tax income is used to make contributions and a notice of intent to claim a deduction (for those contributions) needs to be lodged.

Personal deductible contributions fall under the concessional contribution type (and relevant limits). Please refer to the mandatory employer contributions section above for further details.

Small business capital gains tax (CGT) contributions

If an individual is considering selling a small business or the assets it uses, they may be eligible for CGT concessions that can help to:

  • • reduce the taxable capital gain associated with the sale, and in the process
  • • boost their super retirement savings.

Importantly, an individual may be able to contribute amounts to their super using the CGT 15-year asset exemption or retirement exemption, without using their non-concessional contributions limits.


4. Contributions splitting and spouse contributions—boost to super via individual input

An individual can increase their spouse’s super balance by contribution splitting (ie splitting their own concessional contributions with their spouse)—and/or by making non-concessional contributions to their spouse’s super.

These contributions can be effective in boosting a couple’s combined super savings in a tax-efficient manner—when considering the tax concessions on retirement phase super income streams and the transfer balance cap.

Contribution splitting

An individual can split their concessional contributions from the prior financial year with their spouse. The maximum amount of taxed contributions that an individual can split with their spouse is the lesser of:

  • • 85%* of the individual’s concessional contributions made in the financial year; or
  • • the individual’s concessional contributions cap for the financial year, including any unused concessional contribution cap carried forward from previous financial years.

*The additional 15% represents the contributions tax withheld by the super fund when it received the individual’s concessional contributions.

Please note: The amount split doesn’t count towards either the concessional contributions cap or non-concessional contributions cap of the individual’s spouse. Instead, it continues to count towards the individual’s contribution caps.

Non-concessional spouse contributions

An individual can make a non-concessional contribution to their spouse’s super—up to their spouse’s relevant non-concessional contributions cap limit. Importantly, if an individual does this, then they may be eligible to receive the spouse contribution tax offset (up to $540).

Please note: Non-concessional spouse contributions count towards the non-concessional contributions cap of the individual’s spouse, rather than the individual’s.


5. Downsizer contribution—boost to super via individual input

In addition to increasing contributions, the Government’s Retirement Income Review highlighted that accessing the equity in an individual's or couple's home is another way to boost their retirement income (and outcome).

Importantly, there is an option available to those eligible, that effectively combines the two. Currently, individuals aged 65+, subject to meeting other eligibility criteria, may use the proceeds from the sale of their home to make a non-tax-deductible downsizer contribution of up to $300,000 each (up to $600,000 per couple).

*Australian Government, Treasury. (2020). Retirement Income Review: Final report, July 2020.

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Article by
Natalie Conroy
Natalie is passionate about delivering high quality and strategic financial advice tailored to client’s unique needs and circumstances.She has many years’ experience working in wealth management and finance. She completed a Bachelor of Commerce at Curtin University, then in 2011 she became a Certified Financial Planner and has been working in personal/business risk mitigation, wealth accumulation strategies, compliance, superannuation, and life insurance.

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