Superannuation Strategies for High-Income Earners

For high-income earners in Australia, superannuation offers valuable opportunities to build substantial retirement savings in a tax-effective manner. Leveraging strategies such as maximising contributions, using salary sacrifice, and understanding concessional limits can make a significant difference in retirement outcomes. In this guide, we’ll explore key superannuation strategies tailored for high-income earners.

Maximising Super Contributions

One of the most effective ways to grow your superannuation is by maximising contributions. By making regular contributions, high-income earners can take advantage of compound growth, tax benefits, and increased wealth over time. There are two primary types of super contributions: concessional and non-concessional.

Concessional vs. Non-Concessional Contributions

Understanding the difference between concessional and non-concessional contributions is essential for high-income earners aiming to maximise their super.

• Concessional Contributions: These are contributions made from pre-tax income, such as employer contributions and salary sacrifice. Concessional contributions are capped at $30,000 per financial year (as of the current tax year). They are taxed at 15% within the super fund, which is generally lower than the marginal tax rate for high-income earners, making it a tax-effective strategy.
• Non-Concessional Contributions: These are contributions made from after-tax income. While non-concessional contributions do not receive the same tax benefits as concessional contributions, they are still an effective way to grow super. The annual cap for non-concessional contributions is $120,000, with a three-year bring-forward rule allowing up to $360,000 to be contributed in a single year, depending on total super balance.

Maximising both types of contributions can help high-income earners boost their retirement savings while optimising tax benefits. Working with a financial adviser can provide personalised advice on how best to balance concessional and non-concessional contributions.

Benefits of Salary Sacrifice

Salary sacrificing into super is an attractive strategy for high-income earners. By redirecting a portion of pre-tax income into superannuation, individuals can reduce their taxable income, potentially lowering their overall tax bill while growing their retirement savings.

How Salary Sacrifice Works

When you opt for salary sacrifice, your employer diverts a specified portion of your pre-tax salary directly into your super fund. This contribution is classified as a concessional contribution, taxed at the super fund’s concessional rate of 15%. For high-income earners, who may otherwise be taxed at the highest marginal rate, this approach can result in significant tax savings.

Additional Benefits of Salary Sacrifice

• Tax Efficiency: By reducing taxable income, salary sacrifice can lower the amount of tax paid annually, resulting in both immediate and long-term financial benefits.
• Increased Super Balance: Regular salary sacrifice contributions compound over time, building a larger super balance for retirement.
• Reduced Adjusted Taxable Income: Reducing taxable income through salary sacrifice can also help high-income earners avoid certain tax surcharges and levies.

For optimal results, salary sacrifice should be implemented strategically. A financial adviser can help determine the right contribution amount to avoid exceeding the concessional cap and ensure the best tax outcomes.