Case Study: CSS
Supplementary contributions
Nadia’s story
Nadia is 60 years old and a contributing member of CSS.
Nadia is multilingual and works with the Department of Health in an outer suburban area, helping migrant women access health services. When Nadia began her interpreting career, she had just become a single parent with 3 small boys. Money was tight so paying more than the 5% basic contribution to her super was not a priority. Now she has a lot less to worry about financially.
After receiving $100,000 from her late father’s estate, Nadia began thinking seriously about her super particularly whether adding her inheritance would be a smart way to strengthen her retirement income.
To understand her options, Nadia meets with a financial adviser to explore how she can use her inheritance to support a more secure retirement.
Nadia meets with her adviser
Nadia’s adviser talks to her about supplementary contributions, these are after-tax amounts that she can contribute regularly or as one-off contributions. They can be paid by her employer from Nadia’s after-tax pay or directly by Nadia to CSC.
Nadia’s adviser also lets her know that although she can determine how much she contributes to her super, contribution caps set by the ATO will apply.
This means Nadia will need to consider the total amount of all contributions, whether made by her employer, or by Nadia as personal contributions or through salary sacrifice. Not looking at the bigger picture could mean Nadia may have to pay additional tax.
Through these discussions, Nadia gains a clearer picture of how different contribution types work and what each means for her tax position. Together, they review four key areas.
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“I don’t have to worry so much about money these days. Maybe I could start building up my super, especially if it means I still won’t need to worry about money after I retire!” —Nadia |
This section contains:
After-tax contributions to Nadia’s super
Supplementary contributions are voluntary after-tax (non-concessional) contributions above the 5% basic contribution.
They can be paid by Nadia’s employer from her after-tax pay or directly by Nadia to CSC, and can be paid regularly or as one-off contributions.
For regular supplementary contributions, Nadia can choose to contribute a percentage of her super salary* or a set dollar amount.
To arrange supplementary contributions, Nadia can:
- talk to her employer to arrange regular contributions; and/or
- make one-off contributions directly to CSC at any time through BPAY.
If Nadia was not making the 5% basic contribution, all her supplementary contributions (regular and one-off) would have to be made directly to CSC through BPAY. Members who are contributing at a rate of 0% can change their contribution rate to 5% or more at any time while they are a contributing member. Contributions above 5% will be included in their supplementary contributions. See Contributing to CSS.
*Super salary is the full-time equivalent of a member’s annual rate of pay (gross amount), including any recognised allowances. It does not include overtime or accommodation and travel expenses.
Although Nadia can determine how much she wants to add to her super, caps set by the ATO will apply.
Contribution caps and the tax implications for Nadia
Contribution caps are limits on concessional and non-concessional super contributions set by the ATO and reviewed each year. If a member exceeds either of the caps, the excess will be included in the member’s assessable income and taxed at their marginal rate with a 15% offset to account for the contributions tax already applied.
See the ATO information on Contributions caps for the 2024–25 and 2025–26 financial years.
Concessional contributions cap
This is the maximum amount of before-tax contributions such as compulsory Superannuation Guarantee and salary sacrifice contribution amounts that can be contributed to a member’s super each financial year without contributions being subject to additional tax.
For the 2024–25 and 2025–26 financial years, the concessional contributions cap is $30,000.
How does this affect Nadia?
As the SG contribution paid into Nadia’s super is below $30,000, and she does not intend to salary sacrifice at this stage, she will not incur any additional tax on before-tax contributions made to her super. If Nadia chooses to salary sacrifice in the future, her employer can contribute directly to Nadia’s super from her before-tax salary, either into another complying super fund of Nadia’s choice or through a CSC PSSap Super account.
Non-concessional contributions cap
This is the maximum amount of after-tax contributions that a member can contribute to their super each year without their contributions being subject to additional tax. For the 2024–25 and 2025-26 financial years, the non-concessional contributions cap is $120,000.
How does this affect Nadia?
- Nadia’s annual basic contributions are non-concessional and need to be taken into account when deciding on her supplementary contribution amounts.
- Her $100,000 inheritance is an after-tax amount so it would be classified as a non-concessional contribution.
Before deciding on the dollar amount of her supplementary contributions, Nadia needs to check that the combination of the 2 amounts above does not exceed the $120,000 cap. If they do, Nadia could consider the ATO’s bring-forward arrangement. This allows her to contribute more than $120,000 without incurring additional tax, subject to specific requirements.
Adding more to super: utilising the ATO’s bring-forward arrangement
The ATO's bring-forward arrangement allows members under 75 years of age to bring forward non-concessional contribution cap amounts from future years to contribute in a single year, without incurring additional tax.
For the 2024–25 and 2025–26 financial years, the bring-forward arrangement allows non-concessional contributions of up to $360,000, subject to the member’s total super balance as shown in the table below. Any part of the bring-forward amount not used in the first year can be used in the remaining 1 or 2 years.
Total super balances are calculated as the sum of:
- the Accumulation Phase Value (APV)* reported by each super fund of which the person is a member
- any transfer amounts in transit on 30 June; and
- any super income streams in the retirement phase.
Bring-forward arrangement eligibility
Eligibility for the bring-forward arrangement depends on the member being under 75 years of age, and their total super balance being equal to or less than $2 million.
| Total super balance on 30 June of previous year | Bring-forward arrangement | Non-concessional contribution amount allowed in a year |
|---|---|---|
| <$1.76 million | A member can bring forward two years of non-concessional contributions to make up three years of non-concessional contributions in the same year. | $360,000 |
| $1.76 – $1.88 million | A member can bring forward one year of non-concessional contributions to make up two years of non-concessional contributions in the same year. | $240,000 |
| $1.88 – $2 million | Members cannot use the bring-forward arrangement. They can still contribute up to the annual non-concessional contributions cap of $120,000 without incurring additional tax. | $120,000 |
| >$2 million | Members cannot make any non-concessional contributions without incurring additional tax. | Not applicable |
*The APV for a CSS account is the total of the following: (2.5 x accumulated basic contributions) + accumulated member contribution + accumulated productivity contributions + any transferred amounts, including any co-contributions, low income superannuation contributions, low income superannuation tax offset and SG contributions.
Super balances on member statements or online ATO records may not include recent or in transit contribution amounts. Members should obtain their current total super balance from their adviser or CSC before making any decision about their non-concessional contributions.
How supplementary contributions will affect Nadia's retirement income
To help Nadia make an informed decision, her adviser walks her through how CSS pensions are calculated and how supplementary contributions can influence her final benefit.
What does this mean for Nadia?
As a 60-year-old CSS contributor, Nadia can retire under Age Retirement. However, if she’s offered redundancy, it can change how her benefit is calculated.
Age retirement:
If Nadia retires at age 60, her supplementary contributions will go towards funding an additional pension of up to 20% of her final salary. Any amount not required for this pension will be paid to her as a lump sum, which she can choose to take as cash or roll over to another fund.
Redundancy:
If Nadia is offered redundancy and chooses to defer her benefit, any supplementary contributions she’s made will be included when calculating her additional non-indexed pension, when she later claims it as a Maximum pension, or as a Maximum pension with a lump sum or productivity component.
Any supplementary contributions she makes will increase the value of both her Non-indexed and Maximum additional non-indexed pension options.
Pension calculations
Any component not included in a pension calculation will be paid as a lump sum when Nadia reaches her preservation age or meets a condition of release and will be subject to cashing restrictions applicable at the time.
Age Retirement Calculation
As Nadia joined CSS at age 22 and has not taken any periods of leave without pay that don’t count as service, she has now completed 38 years of service. Her final salary is $120,000.
Referring to Table 4 in the CSS Benefit Tables, her adviser determines that Nadia’s standard CPI-indexed pension will be 46.8% of her final salary, which equates to $56,160 per annum.
Her adviser then refers to Table 1 to calculate the maximum additional non-indexed pension available to her. Based on her age, this is 20% of her final salary, or $24,000 per annum.
To confirm whether Nadia has enough funds within her benefit to support this additional pension, her adviser reviews the benefit components listed on the rundown provided by CSC.
Components:
Basic contributions including interest: $360,000
Supplementary contributions $0
Productivity contributions $140,000
To calculate the maximum additional pension available to Nadia, her adviser uses the following formula;
Permitted additional pension = $120,000 (Final Salary) x 20% (% of final salary based on age) = $24,000
Actual additional pension = 500,000 x 10% (age factor from table 1) = $50,000
Equity required to fund additional pension = $24,000 / 10% = $240,000.
Then, to calculate Nadia’s excess contributions her adviser deducts the equity required to fund the additional pension from her total equity of $500,000. This leaves Nadia with $260,000 which must be paid as a lump sum when she retires.
To summarise, she would have the following benefit options:
Option 1 - Maximum pension
Standard pension=$56,160
Additional pension = $24,000
Excess contributions lump sum = $260,000
Option 2 - Maximum pension, refund of productivity component
Standard pension=$56,160
Additional pension = $24,000
Excess contributions lump sum = $260,000
Option 3 – Standard pension, refund of member and productivity components:
Standard pension=$56,160
Lump sum=$500,000
If Nadia decides to contribute the additional $100,000 as a supplementary contribution, she now understands this amount will be added to her excess contributions lump sum when she claims her benefits as her additional pension cannot exceed 20% of her final salary (based on her age).
Nadia can also consider contributing her $100,000 to PSSap Ancillary or a fund of her choice and using the money to set up a Transition to Retirement account while she continues working and contributing to CSS.
Her adviser explains this would give Nadia access to additional income from her super while she continues working. More information about CSC’s Transition to Retirement product, CSCri is available here; CSC Retirement Income.
The calculation is shown below:
Basic contributions including interest $360,000
Supplementary contributions $100,000
Productivity contributions $140,000
To calculate the maximum additional pension available to Nadia, her adviser uses the following formula;
Permitted additional pension = $120,000 (Final Salary) x 20% (% of final salary based on age) = $24,000
Actual additional pension = $600,000 x 10% (age factor from table 1) = $60,000
Equity required to fund additional pension = $24,000 / 10% = $240,000.
Excess contributions = $600,000-$240,000=$360,000
To summarize, Nadia would have the following benefit options:
Option 1 - Maximum pension
Standard pension=$56,160
Additional pension = $24,000
Excess contributions lump sum = $360,000
Option 2 - Maximum pension, refund of productivity component
Standard pension=$56,160
Additional pension = $24,000
Excess contributions lump sum = $360,000
Option 3 – Standard pension, refund of member and productivity components:
Standard pension=$56,160
Lump sum=$600,000
*Please contact CSC to run a benefit estimate for your client’s specific circumstances. These calculations are for illustrative purposes only.*
Involuntary retirement/ redundancy; deferred benefit calculation
If Nadia is offered redundancy or is involuntarily retired, she can either claim her benefit using the age-retirement calculation above or choose to defer her benefit. If she decides to defer, the following formula will be used to calculate her pension and lump sum options:
| CPI-indexed pension | Basic contributions × 2.5 × age factor |
| Non-indexed pension | (basic contributions + supplementary contributions) × age factor |
| Maximum additional non-indexed pension | (basic contributions + supplementary contributions + productivity contributions) × age factor |
Age factor
| Age at claim time | Factor | Age at claim time | Factor |
|---|---|---|---|
| 55 | 0.0925 | 61 | 0.1020 |
| 56 | 0.0940 | 62 | 0.1040 |
| 57 | 0.0955 | 63 | 0.1060 |
| 58 | 0.0970 | 64 | 0.1080 |
| 59 | 0.0985 | 65 | 0.1100 |
| 60 | 0.1000 |
Components:
Basic contributions including interest: $360,000
Supplementary contributions $0
Productivity contributions $140,000
CPI-indexed pension calculation
$360,000 (Basic Contributions + interest) x 2.5 = $900,000
$900,000 x 10% (Age factor from table 1) = $90,000 standard pension
Non-indexed pension calculation
$500,000 x 10% (Age Factor from table 1) = $50,000 maximum additional pension.
Her available benefit options would be as follows:
Option 1 - Maximum pension
Standard pension=$90,000
Additional pension=$50,000
Option 2 - Maximum pension, refund of productivity component
Standard pension=$90,000
Additional pension=$36,000 ($360,000*10%)
Lump sum of productivity=$140,000
Option 3 - Standard pension, refund of member and productivity components
Standard pension=$90,000
Lump sum of member and productivity=$500,000
When Nadia is formally advised that her role will be made redundant, she decides to contribute* an additional $100,000 to her CSS benefit to increase her non-indexed pension.
* Payment must be received before the final fortnightly employer contribution is made. Because Nadia could resign at any point in the pay cycle, it’s safest to allow at least two weeks plus five days for BPAY to clear, even if payment is made on a weekend. Planning the payment around three weeks before her cease date is a reliable buffer.
Her additional pension will now be calculated as;
$500,000 basic contributions, interest and productivity + $100,000 supplementary contribution = $600,000
$600,000 x 10% (Age Factor from table 1) = $60,000 maximum additional pension.
Please note the supplementary contributions do not impact the calculation of the standard pension which remains the same.
Her available benefit options would now be as follows:
Option 1 - Maximum pension
Standard pension=$90,000
Additional pension=$60,000
Option 2 - Maximum pension, refund of productivity component
Standard pension=$90,000
Additional pension=$46,000 ($460,000*10%)
Lump sum of productivity=$140,000
Option 3 - Standard pension, refund of member and productivity components
Standard pension=$90,000
Lump sum of member and productivity=$600,000
*Please contact CSC to run a benefit estimate for your client’s specific circumstances. These calculations are for illustrative purposes only.*
Super resolution for Nadia
By having met with an adviser, Nadia understands how increasing her super contributions will support a better income for her when she retires.
✓ She knows how much she can contribute to her CSS super, and the steps needed to make those contributions.
✓ She understands the tax implications if she exceeds the ATO contribution caps.
✓ She’s aware that she can take advantage of the ATO’s bring-forward arrangement if her contributions exceed the ATO’s caps.
✓ She understands how CSS pensions are calculated and how her supplementary contributions affect her benefit under different scenarios - increasing her Non-indexed and Maximum additional non-indexed pension if her benefit is deferred after redundancy, but only adding to her lump sum if she retires at age 60 under Age-Retirement.
CSC resources
Product Disclosure Statement
This document provides important information about the features, benefits, risk and cost of investing your super in the Commonwealth Superannuation Scheme. It includes references to the Investment options and risk, Fees and other costs, Tax and your CSS super and Death and invalidity benefits booklets which form part of the Product Disclosure Statement.
Download PDF, 389KBTax and your CSS super
This document outlines how tax can impact on a member's CSS super. It forms part of the CSS Product Disclosure statement.
Download PDF, 348KBContributing to CSS
Top up your CSS super and determine your basic contribution rate.
Download PDF, 491KBCSC resources
Flyer for clients who are new to CSC or coming back to a CSC fund
Government resources
- Total super balance (ATO)
- Contributions caps (ATO)
- AFCA
- ASIC
- ATO
- Money Smart
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