Key tax concessions available through superannuation in Australia

Superannuation is frequently misunderstood as merely an investment vehicle to accumulate wealth for your golden years.

However, in reality, it's also a structure designed to hold various types of investments which offers a plethora of tax benefits that can result in substantial financial gains, especially for those savvy enough to exploit them effectively.

Please note that the following comments are general in nature and you should not act on these without first seeking specific advice from a licenced financial planner who will consider your circumstances.

1. Concessional contributions: the power of pre-tax money

Concessional contributions are pre-tax contributions that come from your salary before tax is applied.

The tax rate on these contributions is for most people 15%, significantly lower than most individual income tax rates.

The real kicker?

These can also deliver tax deductions.

Options include employer contributions, salary sacrificing, and personal concessional contributions.

But beware of exceeding the annual cap of $27,500 and any age or work requirements.

2. Non-concessional contributions: the turbo-boost strategy

These are after-tax contributions, meaning you've already paid income tax on this money.

The key advantage is that the future earnings on these contributions are taxed at the concessional superannuation rate, which can offer substantial savings over time.

While these contributions don't offer immediate tax deductions, they allow for large sums to be injected quickly into your super, up to $110,000 per year or the three-year provision.

Again be mindful of age and work requirements.

You can also bring forward two future financial years of contributions, creating an opportunity to contribute even more.

3. Catch-up contributions: playing the long game

Since July 2018, you can carry forward unused portions of your annual concessional caps, a strategy particularly helpful if you have a significant capital gain in a year.

However, this is only possible if your super balance is below $500,000.

4. Downsizer contributions: turn your home into a retirement asset

New rules enable individuals over 55 to contribute up to $300,000 into their super from the sale of their family home.

This money is separate from other super contribution caps, offering another way to boost your retirement savings.

There are strict rules for this contribution so seek specific advice.

5. Tax-free earnings in the pension phase: the Golden Years are truly golden

Once you turn 60 and retire, your super switches from a low-tax to a no-tax environment.

This means no tax on income, capital gains, or withdrawals up to $1.9 million per person.

6. Co-contribution scheme: maximizing small contributions

The government co-contribution scheme can deliver a 50% financial return for lower-income earners.

This is a supercharged way to grow your nest egg, especially for part-time workers or young employees.

7. Spouse contributions: a win-win for couples

By contributing up to $3,000 to your lower-income spouse's super, you could receive a tax offset of up to $540.

Over the years, this could result in substantial tax benefits while helping to secure your partner’s financial future.

8. Tax-free property investment: the SMSF advantage

If you have a self-managed super fund, you can potentially eliminate capital gains tax (CGT) on property investment, providing the property is held until you switch your super to the pension phase post-retirement.

9. Professional advice: your super's best friend

Navigating the complexities of super requires specialised knowledge.

Speaking to a financial planner can help you make the most out of these tax incentives and avoid costly errors.

So there you have it—nine pivotal tax incentives that can significantly supercharge your retirement nest egg.

Note: These benefits are often underutilized, but with careful planning, they can make an astronomical difference to your retirement nest egg.

About Ken Raiss Ken is director of Metropole Wealth Advisory and gives strategic expert advice to property investors, professionals and business owners. He is in a unique position to blend his skills of accounting, wealth advisory, property investing, financial planning and small business. View his articles