Topping up your superannuation is a smart move, no matter how close to retirement you are or what stage of life you are at. There are several strategies to grow your super balance allowing you to retire comfortably when the time comes.

For most employees they would have already received an extra 0.5% as of July 2022 via their employer super guarantee contribution which increased from 10% to 10.5%.

With several recent changes to super contribution and recontribution rules, now is a great time to start revisit your superannuation.

The initial consideration is whether to make your contributions pre-tax or post-tax, as both bring different benefits.

Concessional contributions are contributions made into to your superannuation fund before-tax. They’re often referred to as ‘pre-tax contributions’ for this reason. They generally make up the majority of your super contributions as they include contributions your employer makes into your super.

Concessional contributions can come from several sources, including:

• Employer Super Guarantee contribution amounts.
• Salary sacrifice contributions that you’ve arranged with your employer.
• After-tax contributions you’ve made that you elect to make tax-deductible by completing the ATO notice of intent to claim a tax deduction form.

There is limit or cap each year. For the 2022-23 financial year, the concessional contributions cap is $27,500. If you contribute less than the concessional contributions cap, you can carry forward the cap. Basically, if you do not contribute up to the concessional contributions cap (e.g. $27,500) for a particular financial year, you may be able to carry the remaining cap balance forward so you can contribute more than $27,500 the following year.

Post-tax or non-concessional super contributions

Post-tax contributions are non-concessional as taxes have already been paid. There are limits to how much you can contribute as non-concessional contributions.

Non-concessional contributions are the voluntary contributions you make after tax, out of your own hip pocket, and there are various ways in which you can make these non-concessional contributions.  For the 2022-23 financial year, the non-concessional contributions cap is $110,000 although bring forward rules can allow you to add more by “bringing forward” 2 subsequent years’ worth of contribution caps.

The options for non-concessional contributions include:

• Spouse contributions – If your spouse earns less than $42,016 per financial year (2022-2023), you can make a super contribution into their super account. This will help boost their retirement savings and will also be tax-deductable for you.

Many couples use this strategy to even up the superannuation balance between them.

• First Home Super Saver Scheme (FHSSS) – The FHSSS allows you to withdraw a portion of your voluntary concessional super contributions to purchase your first home.

To learn more about the FHSSS you can read more in our previous article on the subject.

• Downsizer contributions – For those considering downsizing and selling the family home lived in for more than ten years, contributions up to $300,000 of the sales proceeds can be redirected into superannuation. This amount does not form part of the pre or post tax contribution caps and can help you save more towards your retirement.

If you are considering utilising the downsizer contribution strategy as part of your retirement plan, we recommend connecting with your nearest Tribel Advisers to the complexities around the rules and timing considerations to this strategy.

Super recontribution strategy

If you’re able to make withdrawals from your super by meeting specific conditions of release such as reaching age 65 or ceasing an employment arrangement after turning age 60, you may consider the super recontribution strategy.

As the name suggests, you can use funds that you withdraw from your super and then adding it back using the above-mentioned ways to contribute additional funds to your super.

The re-contribution strategy is usually used to reduce the taxable component of your super which can lead to significant tax savings for your beneficiaries when the money is passed to them.

However it is quite complex and has implications for both your retirement planning and your estate planning.

When considering the super re-contribution strategy, it is important to consider the costs involved in transferring funds whether you have other concessions such as Medicare levy, family assistance or any other income related rebates.

This strategy can benefit those who’ve reached preservation age or under 75 with access to their super. These strategies can make a significant impact to families especially considering other recent changes such as removing the work test requirement for non-concessional super contributions for people between 67 and 75 and extending the eligibility for individuals under 75 to make non-concessional contributions using the bring-forward rules. See more about these changes in our previous article.

From an estate planning point of view, the re-contribution strategy will result in reduced tax payable if superannuation death benefits are paid to non-tax dependent beneficiaries (adult non-dependent children).

Spousal recontribution

The recontribution strategy can be used by couples where the amount is withdrawn from one person’s superannuation and paid into the other persons super account. This allows better management of individual transfer balance caps and more equitable balances between spouses. There can be some tax benefits and social security benefits if the younger spouse has not yet reached pension age.

There are some very specific rules around age requirements when withdrawing and recontributing your superannuation. It is vital to get the right advice as soon as possible. The recent changes, if implemented correctly, can make a significant impact to you and your family.