The Law Handbook 2024

Chapter 5.6: Superannuation 409 Contributions are made to ‘complying’ super- annuation funds or retirement savings accounts. Contributions should be made within 28 days of the end of the relevant quarter. The 11 per cent is calculated against ordinary time earnings up to a quarterly limit. In the 2023–2024 financial year, this limit is $62270 per quarter. The Australian Taxation Office ( ATO ) has provided guidance about what ‘ordinary time earnings’ means in Superannuation Guarantee Ruling SGR 2009/2, which is available on its website (at www.ato.gov.au/ law) . ATO rulings provide guidance only and do not have the force of law. Different rules apply to ‘defined benefit’ super­ annuation schemes (for an explanation of defined benefit superannuation schemes, see ‘Types of benefits’, below). Salary sacrifice If the employer and the fund agree, an employee may make further contributions, within strict limits, under ‘salary sacrifice’ and other arrangements. This can mean that instead of paying tax at the individual’s marginal tax rate on the amount ‘sacrificed’, tax is paid at a concessional rate of 15 per cent. This is usually a lower tax rate than the marginal rate. Tax on concessional contributions for people with pre-tax earnings of $250000 or more is 30 per cent. Tax on concessional contributions for people with pre- tax earnings of $37000 or less is 15 per cent, but the person receives a refund of up to $500 as a low-income super contribution, meaning the tax is effectively 0 per cent. There might be a consequential impact on eligibility for the Medicare levy surcharge or other offsets or benefits. In the 2023–2024 financial year, the maximum that can be contributed and attract a tax deduction is $27500. This maximum includes employer compulsory (super guarantee) contributions, salary sacrifice, and voluntary concessional contributions. Personal contributions All individuals under the age of 75 can claim tax deductions for personal super contributions (voluntary concessional contributions). In the 2023–2024 financial year, the maximum that can be contributed and attract a tax deduction is $27500, subject to a work test (see below). This maximum includes employer compulsory (super guarantee) contributions, salary sacrifice, and voluntary concessional contributions (these are subject to a work test for people aged over 67 years – see ‘Age restrictions’, below). There is no tax on voluntary contributions that did not attract a tax deduction (called ‘non-concessional contributions’). However, only $110000 per year may be contributed on a non-concessional basis, subject to not having more than $1.9 million in total super assets (or less if the person’s super balance cap is less) (ignoring investment gains and losses). A person aged under 75 years with a total superannuation balance of less than $1 . 68 million can bring forward future contributions up to $220000 over a two-year period (meaning a total contribution of $330 000 in one year). A person aged under 75 years with a total superannuation balance of between $1 . 68 million and $1.79 million can bring forward future contributions of up to $110000 in total. If a person has a superannuation balance of less than $500000 at the end of the previous financial year, a catch-up contribution can be made if the maximum concessional contributions (i.e. $27500 a year) were not made in previous years (from 1 July 2018). Small business owners who sell certain business assets can make a non-concessional contribution of up to $1.65 million and receive possible capital gains tax benefits. People aged 55 and over who sell a home they have owned for 10 years or more can make a contribution of up to $300 000 even if they would otherwise be prevented by age or because their total superannuation balance is too large. Co-contribution Certain employees and self-employed people with an annual assessable income and reportable fringe benefits of less than $57 061 and who are aged under 71 years get a government co-contribution of up to $500 for an eligible personal contribution of up to $1 000 to a complying superannuation fund or retirement savings account. The maximum 50 per cent matching contribution amount is paid if the person’s total income is $42016 or less, reducing gradually to nil for incomes of $57016 and above. There are other restrictions. Up to 85 per cent of concessional superannuation contributions made in the previous financial year can