Guided Investor

Last minute super contributions for the 2020/21 financial year

It’s that time of the year again, the final month before the end of the financial year, which means it is your last chance to make contributions into your super for the current financial year.

And there are plenty of reasons why you would want to do this. For most people, it’s a way to save tax, and that is what we will be primarily focusing on today. But there are other reasons to make voluntary contributions such as access to the government co-contribution or maybe you simply want to transition some of your asset base into a tax-free pension environment. We will touch a little on these as well.  

Firstly, let’s start off by looking at the tax saving that superannuation can offer us. If you are under the age of 67 you have the ability to make a tax-deductible contribution to your superannuation. If you are over 67, but under 75, you may also have this same opportunity provided you meet the work test which means you must have worked at least 40 hours within 30 consecutive days in a financial year. Over 75 and the door has closed.

The reason why you would want to make a tax-deductible contribution to super is because it could reduce your tax liability and may even get you a tax refund! Let me give you an example of how this works.

Let’s say you earn $100,000 gross (before-tax) per year and have no other investment income and have no deductions. Throughout the year you should have paid $24,187 in tax through PAYG. When you lodge your tax return you don’t have any additional income to declare nor deductions to claim. As a result, you will not owe anything to the tax office nor will you receive a tax refund – the PAYG was spot on so you are all squared.

In the same situation lets assume you make a $10,000 tax-deductible contribution to superannuation. In this instance, you still would have paid $24,187 in PAYG tax throughout the year but now you have a $10,000 deduction to claim. As a result, the ATO will calculate that you have paid $24,187 in tax but only owe them $20,437 so you will get a tax refund of $3,750!

Now of course, everyone’s tax calculation is different and the amount of refund will vary depending on many factors. However, as this basic illustration demonstrates, getting a tax deduction for contributing to super is a beautiful thing!

Not only will you save money in personal income tax, when the money hits your super fund it will be invested and the compounding can begin.        

But of course, like with everything, there are some restrictions around these contributions and potential downsides that you need to consider. Let’s look at the restrictions first.


As we already touched on, there are age restrictions which will limit your ability to contribute to super. In addition to this, there are contribution cap limits which you need to abide by each year.

A tax-deductible contribution to super will form part of your concessional contributions which has a $25,000 cap limit in the current financial year. This is increasing to $27,500 next financial year.

Bear in mind that any employer contributions or salary sacrifice contributions will also fall under this cap limit so before you make any contribution it is best that you check your super fund and find out how much has already been contributed in the current financial year.

You also need to account for contributions which are still to come in from your employer before 30 June. To do this, just check the frequency and timing of previous contributions during the financial year.

You also have the ability to utilise any carry-forward unused concessional contributions. From 1 July 2018, if you haven’t utilised your full concessional contributions cap limit you can carry forward the unused amount for up to 5 years provided your total super balance is below $500,000 on 30 June in the previous financial year.

The easiest way to find out how much carry-forward concessional contributions you have available is to log into your MyGov account, click on your linked ATO services, select “Super” up the top, under “Information” you will find carry forward concessional contributions.   

Before making a contribution, consider this…

Assuming you are eligible to make the contribution and you have the cap limit available to do so, there are still a few considerations that you should take into account before making a contribution.

Firstly, it is important to note that concessional contributions are taxed by your super fund at a rate of 15%. Given this, it is not tax effective to make a concessional contribution if you earn less than roughly $20,000 as you basically pay no tax outside super. The net tax saving from a concessional contribution can be calculated as the difference between your marginal tax rate and your superannuation tax rate of 15%.

If you are fortunate enough to earn over $250,000, then you will get slugged with the Division 293 tax. This is an additional 15% tax on any contribution that would otherwise take your income over the $250,000 threshold. So, although you would essentially be taxed at a rate of 30% on super contributions, this is still a whole lot better than the top marginal tax rate of 47% when medicare levy is included.

Once inside superannuation you won’t be able to access funds until you meet preservation age. Now I won’t go into detail here about how to access your super, as that is a huge topic on its own, but if you were born after 1 July 1964 then your preservation age is 60. There are also some limited circumstances which you could potentially access the money due to financial hardship or compassionate grounds.

Before making a contribution, you should understand how your funds are invested inside super. I always say to people, you should treat your super fund with as much consideration and intent as you do with the funds sitting in your bank account. It is YOUR money for YOUR retirement and therefore you should know the investments and the fee structure within YOUR super.

The logistics

So you have until 30 June to get your voluntary contributions into super. The contribution is counted in the financial year in which it was processed and allocated by your super fund, not when the money was sent. Keeping this in mind, it is best to send in your final contribution prior to the 15th of June to allow for processing time.

Making the contribution is easy. All you need to do is contact your super fund and ask for banking details. Most super funds will allow you to either BPay the contribution or deposit the money via bank transfer (EFT). There will be a reference number to list in the description which will ensure the funds are allocated into your account.

Once the contribution is in, it is time to fill in a Notice of Intent to claim form which can be found on the ATO website. By completing this form, you are letting your super fund know that you intend to claim a tax deduction for the contribution and therefore your super fund will allocate it as a concessional contribution.

Upon processing of the form, your super fund will send you out an acknowledge of the Notice of Intent. If you use an accountant to help with your tax return, they will want to see this before claiming the deduction.

And that’s it! You have successfully made a contribution, had it allocated correctly and are ready to claim a tax deduction. If you do this, you will thanks yourself twice – once when your tax bill shrinks and again in retirement when your super fund is looking juicy.

Other reasons for making last minute contributions

As I touched on at the start of this blog, there are other reasons why you might want to make a last-minute super contribution, other than to claim a tax deduction. Without going into too much detail, these reasons include:

  • Government Co-Contribution. If you earn less than $39,837 and you make a $1,000 non-concessional contribution into your super, you may be eligible for the $500 government co-contribution. If you earn between $39,837 and $54,837 you may receive a reduced co-contribution payment.
  • Eligible spouse contribution. If your spouse earns less than $37,000 and you make an eligible spouse contribution of $3,000, you may be eligible for a $540 tax offset.
  • Transition assets into super. As you approach retirement it is often a good idea to utilise your super to house majority of your retirement assets as it can be held in a tax-free pension account. Under this scenario you would look to utilise non-concessional contributions and potentially the bring-forward rule to make large contributions into your super.     

The information in this website is for general information only.

It should not be taken as constituting professional advice from the website owner – Guided Investor as Authorised Representative of Symmetry Group (AFSL 426385)

You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your unique circumstances.

Guided Investor is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this document.

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Brad Buters

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