How Much Should a Australian Expat Contribute to their Super? – The ability of Australian expats contributing super whilst living overseas is something we’re often asked about.
For a detailed overview of the background on super contributions and tax implications of super as a non-resident, refer to this article https://atlaswealth.com/news/can-an-expat-contribute-to-their-australian-superannuation/
The most common question we get asked towards the end of financial year is “how much should I contribute to super”, and our answer is always “it depends”.
If you’ve decided you want to contribute to super and reduce or eliminate your Australian tax, the amount would depend on what outcome you are trying to achieve. The questions we ask:
What is your desired outcome?
Common scenarios include:
- Wanting to eliminate all their Australian tax
- Wanting to build up their super as much as possible
- Having a fixed amount to contribute
Eliminating Australian tax can be achieved within a relatively near margin of error if you spend the time to essentially reconstruct your return prior to year-end, but this can be a time-consuming exercise and incur fees if you need support.
If you are not looking for a precise figure and are willing to have any excess treated as a non-concessional contribution, then a conservative payment may be right for you.
If you have a fixed amount to contribute you just need to be aware of the relevant caps available to you and whether a concessional or non-concessional contribution is right for you.
How close do you want to get an estimate?
As alluded to above, the greater accuracy required, the greater effort required by all to determine, so a general estimate may be more practical in many cases, with either erring on the side of a lower contribution (if you prefer to pay a small amount of tax rather than not fully utilising concessional contributions), or making a larger contribution if you are wanting to fully eliminate the tax and have any excess be treated as a non-concessional contribution.
Has anything changed from your prior year which may affect the outcome?
Often a departure or repatriation year will be quite different tax scenarios as you have rentals for a lesser period and the availability of the tax-free threshold and lower tax brackets.
In addition, you usually have to be aware of employer contributions limiting your additional contributions and what tax rate you are in when all income is considered.
Other typical changes we see that might greatly impact this calculation:
- Trailing employer payments, eg bonuses, employee share scheme amounts, termination payments.
- Changes to rentals – eg:
- interest rates coming off low fixed interest rates to high variables.
- Increase in rent
- Periods of vacancy
- Any non-typical renovations/repairs made during the year
In summary, super contributions used effectively can be extremely effective in managing your retirement savings in a tax efficient manner.
As with all situations we would recommend you seek specific advice on your personal circumstances as the above should be considered general guidance and not financial or tax advice.