As you approach retirement age, ensuring that your superannuation is adequately funded becomes even more critical. For Australians aged 60 and above, there are various strategies available to maximise superannuation contributions and optimise your retirement savings. In this article, we will break down the key strategies to help you boost your superannuation after 60, along with the important rules and limits you should know.
Superannuation Contribution Limits
Before making additional contributions to your superannuation, it’s essential to be aware of the contribution limits, as exceeding them can result in penalties. In Australia, there are two main types of contributions:
1) Concessional Contributions (Before-tax)
These are contributions made before tax is applied, such as employer contributions (including the Superannuation Guarantee) and salary sacrifice contributions. For the 2024-2025 financial year, the limit for concessional contributions is $30,000 per year. This amount includes:
- Employer contributions (Superannuation Guarantee)
- Salary sacrifice contributions
- Personal contributions that are claimed as a tax deduction
2) Non-Concessional Contributions (After-tax)
These are contributions made from your after-tax income. The non-concessional contribution cap is $120,000 per year (for individuals under 67 years of age). However, if you’re under 75, you can bring forward up to three years’ worth of contributions, allowing a maximum of $360,000 in one financial year, depending on your Total Super Balance (TSB).
Learn more about Concessional and non-concessional contributions caps.
Knowing Your Total Super Balance (TSB)
Your Total Super Balance (TSB) is a crucial figure that determines your eligibility for certain types of contributions. Understanding your TSB helps you plan your superannuation contributions strategically. Your TSB includes all the amounts in your superannuation accounts, including pensions.
If your TSB is over $1.9 million, you’re ineligible to make further non-concessional contributions to your superannuation.
Superannuation and the Work Test
Understanding the Work Test
If you’re aged between 67 and 74, you’ll need to meet the “work test” to be eligible for making voluntary superannuation contributions. The work test requires you to be employed for at least 40 hours over a 30-day period during the financial year.
Meeting the Work Test
To meet the work test and continue contributing to your super after 67, ensure that:
- You are working at least 40 hours over a 30-day period.
- You have sufficient income to contribute to super.
Once you’ve met this test, you can continue to contribute to your superannuation as usual, subject to the contribution caps.
Failing the Work Test
If you don’t meet the work test, you will be unable to make personal (voluntary) contributions to your super. However, employer contributions through the Superannuation Guarantee (SG) will continue if you’re employed.
The Work Test Exemption
If you’re aged 67 to 74 and fail the work test, you may still be eligible to contribute to your super under the work test exemption. The exemption applies under three conditions:
- Your Total Super Balance is less than $300,000 as of June 30 of the previous financial year
- You haven’t used the exemption in the previous year.
- You satisfied the work test in the financial year before the year in which you made the contribution
You can learn more about restrictions on super fund contributions here.
Strategies for Maximising Superannuation Contributions
Now that you’re familiar with the rules, here are some effective strategies to boost your superannuation after 60:
1) Tax Deductions
If you’re employed and looking to make personal contributions to your superannuation, you may be eligible to claim a tax deduction. For those over 60, personal concessional contributions can reduce your taxable income, offering immediate tax benefits.
How it works: You can contribute to your super and claim a tax deduction for those contributions. This reduces your taxable income and lowers the amount of tax you pay in the current financial year.
2) Salary Sacrifice Contributions
Salary sacrifice allows you to redirect part of your salary into your superannuation. This can be an effective way to boost your superannuation and take advantage of the lower tax rate on concessional contributions (15%) compared to your marginal tax rate.
- How it works: You arrange with your employer to have a portion of your pre-tax salary paid into your superannuation fund. This is particularly beneficial if your income is taxed at a higher rate than 15%, as it helps reduce your overall tax burden.
- Tip: Keep an eye on the concessional contribution cap to avoid exceeding it.
3) Spouse Contributions
If your spouse earns a lower income or doesn’t have significant superannuation savings, consider making a spouse contribution. This can help boost their super while potentially providing you with tax benefits.
4) Government So-contribution Schemes
If you’re a low or middle-income earner, the Australian Government may assist in boosting your superannuation savings through the Super Co-Contribution Scheme.
When you make personal, non-concessional (after-tax) contributions to your super fund, the government may contribute up to $500, depending on your income and the amount you contribute. The maximum co-contribution of $500 is available for individuals who meet specific income thresholds.
Importantly, you don’t need to apply for this co-contribution—it’s automatically paid to your super fund when you lodge your tax return, provided your super fund has your tax file number (TFN).
Learn more and check your eligibility at the ATO website resource.
FAQs
Can I make extra super contributions if I’m still working after 60?
Yes, as long as you meet the work test (if you’re between 67 and 74 years old) and adhere to the contribution limits, you can make extra contributions to your super.
What happens if I exceed the super contribution limit?
Exceeding the contribution cap could result in additional tax. For concessional contributions, the excess amount will be taxed at 47% (including Medicare levy). Non-concessional contributions above the cap may also be subject to tax.
What is the work test exemption, and how do I qualify?
The work test exemption allows individuals aged 67 to 74 who haven’t met the work test to make voluntary contributions to super, provided their Total Super Balance is less than $300,000, and they haven’t used the exemption in the previous year.
How can salary sacrifice benefit me?
Salary sacrificing allows you to contribute part of your salary to your super before tax, reducing your taxable income and potentially saving on taxes. It can be a powerful way to boost your superannuation balance in your later working years.
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DISCLAIMER
The information provided in this article is for general informational purposes only and does not constitute financial advice, taxation advice, or investment advice. TW Accounting & Business Solutions is not licensed to provide financial product advice under the Corporations Act 2001.
Before making any superannuation contributions, withdrawals, or investment decisions, you should consider your personal circumstances and seek advice from a licensed financial adviser or a registered tax agent.
Superannuation laws are complex and subject to change. The Australian Securities and Investments Commission (ASIC) provides information on licensed financial service providers at www.moneysmart.gov.au.
