You invest in super by making contributions. Contributions can be made by you or your spouse, or by your employer.
1. Superannuation guarantee
If you are an employee, your employer is required to pay superannuation contributions on your behalf. These contributions are called superannuation guarantee. It is compulsory for most employees, unless you are exempt.
If you are eligible for superannuation guarantee, your employer makes compulsory contributions into your superannuation account. Some employers may contribute more to your superannuation, but this depends on the terms of your employment.
If you are self-employed, you do not receive superannuation guarantee contributions but you may be eligible to claim a tax deduction for personal contributions.
2. Salary sacrifice
You can add your own money to your employer's contributions to increase your superannuation savings. You can do this through what is called a ‘salary sacrifice' contribution. The contribution is made by your employer who pays part of your salary to your superannuation fund, instead of paying it to you. You tell your employer how much you want to "sacrifice" and choose to take less salary.
The amount you elect to sacrifice to superannuation comes off your gross salary, before you pay tax, so it may result in a tax saving. This tax saving comes about because, for most people, the tax saved on the forgone salary exceeds the tax that is paid when the equivalent amount is contributed to your superannuation.
Employer contributions are not the only way for you to build your superannuation. You can choose to make personal contributions to your super from your after-tax income. Depending on the amount of money you earn, making a personal contribution to superannuation may entitle you to a co-contribution from the Government.
If you are self-employed, you can also contribute to superannuation by making personal contributions. You may be entitled to a tax deduction for the contributions you make, depending on your individual situation.
It is also possible to contribute to your spouse or partner's superannuation. This type of contribution may entitle you to a tax offset, depending on how much your spouse earns.
How are superannuation contributions taxed?
Contributions are generally broken down into two categories:
- Tax-deductible - these are also known as concessional contributions. Tax of 15 per cent will be deducted from the contribution as it enters the fund.
- Non tax-deductible - these are also known as non-concessional contributions. There will be no tax deducted from the contribution upon entry to the fund, provided that your contributions are within specified limits.
The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.