How to get the government to top up your super


It's in our best interests to maximise our retirement income and, to that end, we all want to pay the largest amount into superannuation that we can but, in practice, we are generally hampered by our own cash flow.

Typically, we don't have enough cash left over at the end of each pay month to spare to pay into super!

But if you do happen to have some spare cash (maybe you have received a windfall) or even if you don't, there are a number of superannuation concessions that we should all be looking to leverage.

superannuation tax concessions

Concessional contributions

There is a limit on how much you can put into super each year from your pre-tax income. Such contributions are called concessional contributions.

From July 1, 2021, you can contribute up to $27,500 into your super fund. This includes your employer's 11% super guarantee contribution, any salary sacrificed amounts and tax-deductible personal contributions. This is called the concessional contributions cap.

From July 1, 2018, you can carry forward the unused part of your annual concessional contributions cap for up to five years (using up the earliest year first) provided your superannuation balance is less than $500,000.

The unused cap amounts you can carry forward depends on the amount you have contributed in previous years, starting from 2018-19. You can carry forward unused cap amounts from up to five previous financial years. Unused cap amounts are available for 5 years and expire after this. For example, a 2018-19 unused cap amount that is not used by the end of 2023-24 will expire.

Where you make concessional contributions that exceed the $27,500 annual cap (and can't absorb the excess through unused carried forward contributions), the excess is included in your assessable income for income tax purposes as excess contributions.

A tax offset of 15% is available to recognise that 15% tax has already been deducted on the original contribution. You can withdraw up to 85% of your excess contributions from your super fund to pay your income tax liability.

Tax-deductible personal contributions

You can make additional concessional contributions up to your concessional contributions cap and claim an income tax deduction for doing it.

As well as making super contributions from your self-employed income or employment income, it is also possible to make super contributions from investment income (including dividends or rental income) and capital gains.

After-tax contributions

After-tax contributions are known as 'non-concessional contributions' because you don't receive a tax deduction. Such contributions are the easiest way to top up your super as you simply deposit your own money into your super account.

If you have some spare cash, this is a great way to give your retirement savings a boost because the money is then in a low-tax environment, meaning you'll generally get a better return than if you'd invested in the same assets outside super.

Contributions from your after-tax income don't get taxed when your fund receives them because you have already paid tax on the income from which the contribution was paid

From July 1, 2021, you can pay up to $110,000 in non-concessional contributions each year. However, if your superannuation balance is more than the general transfer balance cap ($1.7 million for 2022-23 and $1.9 million for 2023-24) you cannot make non-concessional contributions.

Going forward, the non-concessional cap will always be fixed at four times the amount of the concessional cap, so as one goes up so will the other.

There is also a three year "bring-forward" rule for taxpayers who are under 75 years of age which allows you to make a contribution of up to $330,000 for the current and next two income years.

Where you make non-concessional contributions into your super fund that exceed the cap, you can withdraw the excess without suffering a financial penalty.

However, any earnings which arise within the super fund and which are attributable to the excess contribution will be included in your assessable income for income tax purposes and taxed at your marginal tax rate (less a 15% tax offset).

If you choose not to withdraw the excess contributions from your super fund, you will be taxed on the excess amount at the top 45% marginal rate of income tax (plus 2% Medicare levy), irrespective of your actual marginal rate.

Government co-contributions

To help you save for retirement, the Government has an incentive program that rewards you for making eligible personal contributions to your superannuation fund. If your total income is less than $43,445 (for 2023-24), the Government will match your eligible superannuation contributions by 50 cents per dollar up to a maximum of $500 per year.

The superannuation co-contribution phases down for eligible individuals with total income between the lower and higher income thresholds. The superannuation co-contribution is tapered by a rate of 3.333 cents for each dollar of total income for the year that exceeds the lower income threshold.

The superannuation co-contribution ceases once the upper threshold is reached. The upper threshold is $15,000 above the lower threshold making it $58,445 for the 2023-24 year.

To qualify for the government co-contribution, you need to meet a number of conditions:

  • you must have made an eligible personal superannuation contribution to a qualifying superannuation fund during the financial year. An eligible personal superannuation contribution is a non-concessional (after tax) contribution made to a superannuation fund.
  • your total income is less than $58,445, made up of assessable income plus Reportable Fringe Benefits and Reportable Employer Superannuation Contributions reduced by eligible deductions (if any) from carrying on a business,
  • you are under 71 years old at the end of that tax year,
  • you lodged an income tax return for that financial year,
  • you have not held a temporary resident visa at any time during the financial year,
  • you earned 10% or more of your total income from being employed, running a business, or a combination of both. 
  • have a total superannuation balance of less than the general transfer balance cap ($1.7 million for 2022-23 and $1.9 million for 2023-24) at the end of 30 June of the previous financial year
  • Your non-concessional contributions have not exceeded the non-concessional contributions cap for the year

What do you have to do?

  1. Assuming you earn less than $58,445 ('total income') for the 2023/24 year, you then make a non-concessional (after-tax) contribution to your superannuation fund.
  2. You lodge your tax return.
  3. Within 60 days, the Government pays the co-contribution into your superannuation fund.

Your superannuation fund cannot accept after-tax contributions, or receive co-contributions on your behalf, if you have not provided your tax file number (TFN) to your fund.

Low-income superannuation tax offset

If you earn income up to $37,000, you will receive a refund into your superannuation account equivalent to the tax paid on your concessional superannuation contributions (for example, the super paid for you by your employer) up to a cap of $500.

This means that most low-income earners will pay no tax on their super contributions and recognises that without the existence of the offset, the low paid are actually disadvantaged by the super system since they are charged tax at 15% on super contributions which may be higher than their actual marginal rate of tax.

You don't need to do anything to claim the offset. The ATO will determine if you are eligible and arrange the offset.

Paying super to your spouse's super fund

If your spouse earns a low income or doesn't work at all, you can claim a tax offset if you contribute to a complying superannuation fund on their behalf.

You can claim an 18% tax offset of up to $540 per year.

To qualify, your spouse's assessable income plus reportable fringe benefits amounts and reportable super contributions must be less than $37,000. Above that, the offset is gradually reduced and cuts out altogether once your spouse's income exceeds $40,000.

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Mark Chapman is director of tax communications at H&R Block, Australia's largest firm of tax accountants, and is a regular contributor to Money. Mark is a Chartered Accountant, CPA and Chartered Tax Adviser and holds a Masters of Tax Law from the University of New South Wales. Previously, he was a tax adviser for over 20 years, specialising in individual and small business tax, in both the UK and Australia. As well as operating his own private practice, Mark spent seven years as a Senior Director with the Australian Taxation Office. He is the author of Life and Taxes: A Look at Life Through Tax.