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Help Your Children Set Up Super: A Superannuation Strategy for Child Contributions

Article By Adam Hurwood | | Accounting & Tax

Helping your children get set up for their future is a goal shared by almost-all parents. What parent doesn’t want their children to get the best possible start in life after they leave home?

But how can you do that effectively?

The most common approach is perhaps to gift cash to assist your child in the purchase of their first home. A potentially smarter way to help your child grow financially in the short term and secure their long-term financial position may be to contribute to their super account on their behalf.

But what is a good superannuation strategy for child contributions?

Is making contributions for your children a tax-effective way to help them?

How can it help in the short term as well as the long term?

Superannuation for your child for the long term

By making contributions to your child’s super fund, you are effectively investing the money for their retirement.

With the benefit of compounding interest, the money will grow, allowing them to accumulate a greater retirement fund when the time comes.

A kick-start early in life will make a massive difference to their final balance as it both allows time in the market and quickly builds the balance above $50,000, which is key to offsetting the impact of fees and insurance on your super.

That’s a great strategy for the long term but what about the short term?

Superannuation for your child for the short term: the tax benefit

While a superannuation strategy that makes child contributions does favour long term security and growth, it also has a short-term benefit.

Contributions are classed as voluntary contributions that your child will be able to claim as a tax deduction. This will reduce the amount of tax they have to pay and potentially increase their end-of-year tax refund.


Say your child is working and earning $50,000 per year:

  • $4,750 would be put into super from their employer
  • If you make a $10,000 contribution, your child could then claim it as a tax deduction
  • This reduces their tax by $3,250 (32.5% tax rate)
  • Their super balance would also increase by $8,500 ($10,000 – 15% contributions tax)
  • The total benefit to your child would be $11,750

Other big benefits of super contributions for your child

Another major benefit of this method is that the tax refund it provides to your child can be used to contribute to their home deposit.

Importantly, they can also take advantage of the first home super saver scheme.

The super saver scheme allows you to withdraw up to $15,000 in voluntary contributions to your super for the purpose of buying your first home.

So, with this strategy you are able to help your child secure their long-term future AND help them in the short term with owning a home.

Please bear in mind that there are caps on these contribution amounts and the first home scheme is complex.

If you’d like to find out if a superannuation strategy for child contributions is a suitable option for your present financial situation, contact an Altitude Adviser for more information.