How much you can squeeze into super this year?

Too many people are still confused as to just how much they can contribute to super  and when, so I thought given it’s the start of the new year and we are all making new year resolutions hopefully to contribute more to super, I thought I would run through the rules.

If you are in paid employment in Australia, you can contribute up to $27,500 to super each year and claim it as a tax deduction. If you haven’t claimed the full deduction in recent years you might be able to go back and use up these missed contributions to add more.

This is a question you need to ask your tax agent. So, if you have additional funds to contribute to superannuation, make sure you ask your tax agent if this will save you money on your taxes if you do increase your tax-deductible contributions.

Also be aware that once you do claim a tax deduction for a super contribution, the fund is obliged to tax this type of contribution at 15 per cent, so you need to make sure it is saving you money on your taxes before you do so.

In addition to this, you can contribute up to $110,000 each year to super and not claim it as a tax deduction. If you do this, you will find the full amount will emerge in your super account as it is not subject to contribution tax.

Also, you can contribute up to $330,000 as a non-tax deductible contribution in any three year tax period as long as you make no further contributions beyond this amount. This also means you can contribute $110,000 in June and then a further $330,000 in July of the same calendar year as long as you make no further contributions for another two years.

If you sell your family home and you pass all the relevant rules regarding the downsizer contributions, you can also contribute an extra $300,000 to super in addition to the above contributions.

So depending on your circumstances you can contribute $27,500 as a tax deduction, and a further $440,000 as a non-tax deductible contribution if you stay with the rules and a further $300,000 if you meet all the requirements.

You can contribute $767,500 during the course of this calendar year and your partner can as well as long as you stay within the rules. So together you  can contribute the same amount as well or $1,535,000 in total if you are a couple.

That’s a very attractive option if you have inherited funds or decided to sell an investment property as well as you own family home, as once we start an account-based pension, all the assets within super are tax free both in terms of income and capital gains.

Importantly, you only have until age 75 to make these contributions and as a general rule you can only have $1.9 million in super supporting an account-based pension. But just think on this.

If you arrange your finances correctly you can have up to $1.9 million in super and your family home and if these are your only assets, never pay tax again.