Voluntary contributions are an excellent way to grow your superannuation balance and secure a more comfortable retirement.
Unlike compulsory employer contributions, voluntary contributions are made at your discretion, offering flexibility and potential tax advantages. Here’s a concise guide to voluntary super contributions, who can make them, and key rules to keep in mind.
What Are Voluntary Contributions?
Voluntary contributions to your super fund can be made by:
- You: Through salary sacrifice or personal contributions.
- Others: Spouse contributions, parental contributions, or contributions from friends or insurers.
- Employers: Contributions exceeding their super guarantee (SG) obligations.
- Government Schemes: Government co-contributions or first home super saver contributions.
- Special Schemes: Downsizer contributions or personal injury election amounts.
These contributions differ from compulsory contributions mandated under SG laws, industrial agreements, or fund governing rules.
Who Can Make Voluntary Contributions?
Your eligibility to make voluntary contributions depends on:
- Age:
- Under 75 years: You can make all types of voluntary contributions. If you are aged 67–74, you may need to satisfy the work test to claim a tax deduction.
- 75 years or older: Your fund can accept downsizer and compulsory employer contributions. Other voluntary contributions can only be accepted within 28 days after the month you turn 75, provided you meet the work test.
- Tax File Number (TFN): Your fund must have your TFN to accept contributions.
- Work Test or Exemption:
- To meet the work test, you must work 40 hours in a consecutive 30-day period during the financial year.
- The work test exemption allows contributions for an additional year if you have a total super balance under $300,000 and meet certain criteria.
- Total Super Balance: Restrictions apply to non-concessional contributions if your balance exceeds certain thresholds.
Contribution Rules and Limits
Your super fund’s governing rules dictate whether contributions can be accepted. Contributions that breach limits or restrictions, such as excess balances or missing TFNs, must be returned.
Maximising the Benefits
Voluntary contributions can help you take advantage of tax incentives and boost your super:
- Salary sacrifice contributions reduce taxable income.
- Spouse contributions may offer tax offsets.
- Downsizer contributions allow older Australians to contribute proceeds from selling their home.
Consult your fund or a financial advisor to tailor a contribution strategy to your goals.
Voluntary contributions offer flexibility and control over your superannuation, making them a powerful tool for financial security.
Start the new year by reviewing your options and planning a strategy to grow your retirement savings.
