We sometimes get asked by our readers whether there is anything they can do before the end of the financial year to improve their income in retirement. Here are a couple that relate to superannuation.
Adding money to super
Some people might be in a position to add extra money to super. There are both age and annual contribution limits to what you can contribute so if you haven’t reached 67 or your limits and have some financial capacity to do so, you might consider adding extra to super. So what are the limits?
For the 2020/21 financial year, people can make the following contributions of:
- $25,000 pre tax (concessional) and
- $100,000 post tax (non concessional) if your super balance is less than $1.6m and you are under age 67
While these limits might seem very high to many of us some people are able to make larger payments as they transition to retirement. People selling or downsizing their home are sometimes – conditions apply – able to get relatively large sums of money into super through the “downsizer” option which allows a contribution of up to $300,000 to be made to super from the proceeds of selling their home.
Co-contributions
This is still about adding money to super but in this case the Government will boost what you have added with a co-contribution. How does this work?
If you earn $39,837 or less the Government will contribute 50c for every $1 you contribute after tax to your super. The maximum government contribution will be $500. Once you earn more than $39,837 the level of the Government co-contribution starts to decrease and cuts out completely at $54,837. If you want to take advantage of the co-contribution the money must be in your super account by 30 June 2021. The ATO has a few other conditions which are summarised below.
- have made one or more eligible personal super contributions to your super account during the financial year
- pass the two income tests (below the income threshold and at least 10% of eligible income comes from employment related activities)
- be less than 71 years old at the end of the financial year
- not hold a temporary visa at any time during the financial year (unless you are a New Zealand citizen or it was a prescribed visa)
- lodge your tax return for the relevant financial year
- have a total superannuation balance less than the general transfer balance cap at the end of 30 June of the previous financial year
- not have contributed more than your non-concessional contributions cap.
You can also visit the ATO website here for more details.
You don’t need to apply for a co-contribution. Once you have lodged your tax return the Government will assess your eligibility and make any eligible co-contributions to your account.
If i have not been in employment for the last 5 years, and I am under 67 years old can I contribute $1000 from my savings to get the $500 rebate from the government. I’m with Australian super.
Hi Chris. Depending on the sources of income you receive you might not meet what is known as the 10% eligible income test. You can read more about that here.
I am still employed fulltime I will be 68 in just over a months time .i currently salary sacifice 200 a week. If I reduce my hours from 50 to 60 hrs to say 40 hours a week.i would get a part pension because I would just go under the income test. When I stop work and go to age pension, hope does income stream pension affect the pension and also if I work part time how much can I earn regarding the work bonus.
Hi Eric. There are lots of rules surrounding how income streams are treated as it varies according to whether the income stream is a defined benefit income stream, if it is purchased with superannuation money, or purchased with savings. Depending on the type of income stream, when it was purchased and how it is purchased it can be treated in different ways including as an asset and deeming rules applied or in the income test once payments start. Because there are s many variations and we don’t know your circumstances we can’t give a simple answer and recommend you get some advice on this matter.
In terms of the work bonus we wrote about this in this article which might help you.
Regards
Readers may also not be aware that they can still contribute the $25,000.00 concessional amount if they are over 67 either by salary sacrifice or if they pass the work test ie 40 hours in a 30 day period even if they don’t do 40 hours every month as it is not stated that it has to be every month
Hi I just recently contributed $13,000 to my super from my shares, am I eligible for the $500 government rebate? I am 65 years old female still employed and do about 18-20 hours a week
Hi Maria. You meet the age requirements. The key test is whether you also meet the income thresholds. You can find out more about the ATO website here.
I am 72 years
Can I contribute to my súper and get Governnent contribution?
I am still working on a casual basis
Thank you
I Isabel. Unfortunately, it looks as if you have exceeded the age threshold for the co-contribution. You can read more about the conditions the ATO sets here.
i am 75 and work full time i can no longer contribute to my super account only funds from my employer are accepted i just have to se my funds go down in fees etc is this fair placing the money into the bank earns nothing interest