By Leon Jones
Superannuation is more than just a retirement nest egg—it’s a powerful tool for managing your finances and saving on tax. Here are 14 essential superannuation and tax strategies to help you make the most of your super.
- Boost Your Spouse’s Super and Save on Tax
If your spouse earns less than $40,000 annually, contributing to their super can not only boost their retirement savings but also provide you with a tax offset of up to $540. To be eligible, your spouse must under age 75 and have a total super balance less than $1.9 million.
Example: Harry contributes $3,000 to his wife Julie’s super, earning him a $540 tax offset while Julie’s super grows by the full $3,000.
- Get the Government to Top Up Your Super
If your income is below $60,400, you may qualify for a government co-contribution of up to $500 when you contribute $1,000 of your after-tax income into your super. The less you earn, the more the government adds, making this a great strategy for low-to-moderate income earners.
Example: Andrew earns $36,000 and contributes $1,000 to his super. The government adds an extra $500, boosting his total contribution to $1,500.
- Salary Sacrifice to Save on Tax
Salary sacrificing into super can significantly reduce your taxable income. By redirecting some of your pre-tax salary into your superannuation, you can lower your tax rate to just 15% on these contributions, rather than your marginal tax rate.
Example: Sara, earning $75,000 a year, sacrifices $10,000 into her super and saves $1,750 in tax, increasing her overall retirement savings.
- Make Personal Deductible Contributions
From 1 July 2017, Australians under age 75 can claim a tax deduction for personal super contributions where the work test (or work test exemption) is met. This can reduce your taxable income, making it a smart move if you have surplus cash and want to bolster your super.
Example: Susan is 59, works 40 hours per week, earns $150,000 and contributes $10,000 to her super, reducing her taxable income to $140,000 and saving $2,400 in tax.
- Offset Capital Gains Tax with Super Contributions
Selling investments like shares can trigger capital gains tax (CGT). By making a personal deductible super contribution, you may be able to offset these gains, reducing your overall tax bill.
Example: Tom sells shares, realising a $50,000 gain. By contributing $25,000 to his super, he reduces his CGT to zero, potentially savings thousands of dollars in tax.
- Purchase Insurance Through Your Super Fund
Buying life or total and permanent disability insurance through your super fund allows you to use pre-tax dollars, effectively reducing the cost. This strategy maximises your cover without impacting your cash flow.
Example: George has an annual $700 premium for life and TPD insurance. By paying through his super fund, he uses $824 of his pre-tax salary instead of $1,111, effectively increasing his net cash flow.
- Transition to Retirement (TTR) Strategy
Once you reach your preservation age, you can access your super through a Transition to Retirement (TTR) pension while still working. This allows you to supplement your income or continue salary sacrificing more into your super, maximising your retirement savings and reducing your tax.
Example: Margaret, aged 60, has $350,000 in her superannuation account. She starts a TTR pension, drawing between $14,000 and $35,000 annually, giving her flexibility to manage her cash flow as she reduces her work hours.
- Catch-Up on Concessional Contributions
If you have a total super balance under $500,000, you can carry forward unused concessional contributions for up to five years. This allows you to make larger contributions in a future year when you have the capacity.
Example: Steve has a total super balance of $400,000 and has been making concessional contributions of $10,000 per year over four years in addition to his employer super contributions. When he checks his myGov account, he finds that he has remaining concessional contribution cap of $55,000 in the fifth year, which he can use to boost his super.
- Bring Forward Non-Concessional Contributions
For those under 75, the bring-forward rule allows you to contribute up to three years’ worth of non-concessional contributions in a single year, up to $360,000 (as at FY2024/25). You must also have a total super balance below $1.9 million (from FY2023/24) on 30 June of the previous financial year, This strategy helps you supercharge your super balance quickly.
Example: Lisa, aged 52, has a total super balance of $700,000 makes a $150,000 non-concessional contribution in the first year, triggering the bring-forward rule. She can then contribute another $210,000 over the next two years, maximising her contributions early.
- Split Contributions to Balance Transfer Caps with Your Spouse
Splitting super contributions with your spouse can help manage individual transfer balance caps, maximising your combined tax-free income streams in retirement.
Example: Jeff splits 85% of his $25,000 concessional contribution with his wife Wendy, effectively doubling their transfer cap opportunities.
- Defer Asset Sales to Manage CGT
If you’re planning to sell an asset with a capital gain, consider deferring the sale to a year when your income is lower. This can reduce the CGT payable.
Example: Amanda, delays selling her shares until the year following her retirement, saving significantly on CGT.
- Pay 12 Months of Interest in Advance on Investment Loans
Prepaying interest on an investment loan allows you to claim the deduction this financial year, potentially reducing your current tax bill.
Example: Paul, earning $70,000, prepays his $7,500 investment loan interest, reducing his taxable income to $62,500.
- Prepay Income Protection Insurance Premiums
Paying your income protection insurance premiums a year in advance allows you to claim a tax deduction in the current financial year, lowering your taxable income.
Example: Ken, earning $100,000, pays his $4,560 income protection premium in advance, reducing his taxable income by this amount.
- Implement a Super Re-contribution Strategy
This strategy can help minimise tax on death benefits paid to non-dependent beneficiaries, such as adult children. Withdraw funds from your super tax-free and re-contribute them as a non-concessional contribution. A condition of release must first be met to enable the withdrawal of funds from super.
Example: John, aged 65, withdraws $300,000 from his super and re-contributes it, ensuring his adult son receives it tax-free upon John’s passing.
Superannuation strategies aren’t about avoiding tax—they’re about planning smarter so you can make the most of your investments while staying compliant. Always consult a financial adviser to tailor these strategies to your personal circumstances.
Are you ready to take control of your super? I’m a financial planner in Maitland, NSW helping clients in Newcastle and the Hunter Region. Book a consultation with us today and let’s make your retirement dreams a reality!
Tax rates and superannuation rules and thresholds were correct as at 30th August 2024 and are subject to regular change. Before acting on any information contained herein you should consider if it is suitable for you. You should also consider consulting a suitably qualified financial, tax and/or legal adviser. This information is no substitute for professional financial advice. We encourage you to seek professional financial advice before making any investment or financial decisions. In any circumstance, before investing in any financial product you should obtain and read a Product Disclosure Statement and consider whether it is appropriate for your objectives, situation and needs.