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Personal Superannuation Contributions

The strategy of making personal superannuation contributions is being utilised more frequently as people become more aware that the statutory rate of superannuation contributions is inadequate to provide financial independence in retirement. The superannuation environment has been evolving in Australia since the 1980’s – and at times the rate of change, particularly regarding the regulatory environment, has been frustratingly rapid and complex: however, the financial independence of Australians retiring in the future is becoming more certain as these changes are implemented and take effect.

(Since we first posted this article there have been several changes to the ‘caps’ and further constraints on contribution eligibility as well. The current scenario is referenced following the extract from the original post below.)

Are personal superannuation contributions worthwhile investments?

There is a variety of ways that contributions can be paid into a superannuation account/ fund: the most utilised way in the era since the Superannuation Industry Supervision (SIS) legislation came into being, is by an employer making the appropriate superannuation guarantee contribution to an approved fund on account of their employees. That contribution is based on a percentage of ‘earnings’ over a defined period: at the time of this update to this article, the rate is 9.5%, destined to climb to 12% over the coming several years.

These contributions are considered to be concessional contributions and are taxed at a favourable rate, typically 15% regardless (in most cases) of the marginal tax rate applicable to the member. Earnings generated within a superannuation account are also taxed concessionally, agin usually at 15%.

Given that the superannuation account is expected to be locked away for years/ decades, earnings on those investments being taxed at a concessional rate, means that the contributions invested within a superannuation account become worthwhile for both investment reasons (compounding ‘interest’; and dollar cost averaging) and for taxation reasons (concessional rate of tax).

How much can I put into my superannuation account?

By way of historic record we include the following from the original post, published in May 2008 (and hasten to note that the allowable amount for personal superannuation contributions has been severely reduced) –

“If you are self employed or a partner in a partnership, you can make personal deductible superannuation contributions that will reduce your taxable income for the financial year. The amount that you can contribute to Superannuation and claim as a deduction will depend on your age (refer to the table below for limits). These contributions must be made before the 30 June 2008 to ensure you are entitled to claim a deduction for the 2008 financial year.

Age Limit
Under 50 years of age $50,000
Between 50 and 65 years of age $100,000
Over 65 years of age Consult your Financial Adviser

If you were partly self-employed during the year or you were not in eligible employment (for example, you were a full-time investor) you may also be eligible to claim a personal deducted superannuation contribution. Please speak to your Financial Adviser or your Tax Agent to ensure you are entitled to claim a tax deduction.”

Note – deductible contributions are also known as Concessional Contributions.

We published an update of this theme in a new article in May 2013, titled ‘Who can contribute to superannuation?’ That article has since been updated and refreshed to reflect current allowable caps on superannuation contributions. Before acting on any action to contribute to your superannuation account, check with the ATO website Page for up-to-date information, and/ or call your ContinuumFP adviser.

What should I know about investing in Superannuation?

All investing is better done to a well-considered strategy taking all relevant circumstances and needs into account. In other articles touching on this theme as it relates to superannuation we have addressed some of the questions that clients raise when considering whether superannuation is the most appropriate ‘vehicle’ in which to accumulate their retirement investments: they include –

How can I get the best out of my superannuation?

The Continuum Financial Planners Pty Ltd team works to the mantra that – ‘we listen, we understand; and we have solutions‘ when dealing with our clients financial planning and wealth management needs. To ensure your superannuation contributions are being most effectively invested, meet with one of our adviser team: call 07-34213456, or complete the Contact Us page to arrange an appointment at your earliest convenience.

(This article was originally published in May 2008; it has been refreshed and updates occasionally since then, most recently in March 2021.)

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