Summary
Help grow your retirement savings
There’s more than one way to grow your super for retirement. Adding extra to your super when you can afford to, could be a great way to boost your savings while you’re working. The sooner you start, the more chance your super has to grow for the future. Plus, super can be a tax-effective way to save and invest for your retirement.
There are two main types of extra super contributions:
- Before-tax contributions
- After-tax contributions
Source: AustralianSuper data, 1 November 2023. KYF Contributions: Contributions and Age.
No matter how close you are to retirement there are still things you could consider doing to boost your super. Like adding extra to your super on top of your employer’s contributions. If you can afford to, this could be a great way to boost your savings and work towards the retirement you want.
Before making a decision to add more to your super, consider your personal financial circumstances, contribution caps that may apply, any impacts on government and employee benefits and any tax issues, AustralianSuper also recommend you consider seeking personal financial advice.
There are two main types of additional contributions: before and after-tax contributions. Another way to add to super is through spouse contributions, which are contributions you can make on behalf of your partner from your income.
You can choose to make extra contributions in any of these ways, depending on your personal financial situation and what works best for you.
-
Before-tax contributions
These are also called ‘concessional’ contributions. They include:
- employer contributions.
- salary sacrificed personal contributions.
- personal after-tax contributions you claim a tax deduction for.
After-tax contributions
These are also called ‘non-concessional’ contributions. They’re amounts you contribute from income you’ve already paid tax on, such as your take home pay, tax refund, sale of an asset or windfall.
- To be eligible you must be less than 75 years old – noting you have 28 days after the month of your 75th birthday to make certain contributions.
- Have a total super balance of less than $1.9 million1 on June 30 of the previous financial year.
- After-tax contributions are included in the non-concessional (after-tax) contributions cap. This cap is currently $120,000 pa, but you may be able to bring-forward up to two years' worth of cap into the current financial year (giving you the equivalent of three years cap), depending on your total super balance and age.
Spouse contributions
You must be married or in a de facto relationship with your spouse to make super contributions on their behalf after tax. You must also both be Australian residents.
Depending on how much your spouse earns, adding to their super could help secure a brighter retirement for your spouse, and may save you on tax (income threshold and other eligibility conditions apply).
The government co-contribution
If you make after-tax super contributions and your yearly before-tax income is less than $60,400, you could be eligible for a government co-contribution2.
Under the scheme, the government matches up to 50 cents for every dollar you contribute to your super from your after-tax pay, up to a maximum of $500 pa.
Using salary sacrifice to add more to your super
Is salary sacrificing into your super right for you?
Paying extra into your super could save you tax and help you retire with more.
For middle-to-high income earners, making before-tax super contributions could help save tax. This is because the tax paid on your super is generally less than the tax you pay on your income. However, before-tax contributions may not be as tax-effective for low-income earners.
Before making a decision to salary sacrifice to your super, consider your personal financial circumstances, contribution caps that may apply, any impacts on government and employee benefits and any tax issues. You should consider your debt levels before adding to your super. AustralianSuper also recommend you consider seeking personal financial advice.
-
What are salary sacrifice contributions?
Making a before-tax contribution to your super is known as ‘salary sacrifice’. This is where you choose to give up or ‘sacrifice’ part of your before-tax salary and add it directly into your super account.
When you make extra contributions to your super through salary sacrifice, you’re adding to your super before income tax is deducted. Because super is generally taxed at 15% - depending on how much you earn, making before-tax contributions to your super could provide a tax-effective way to boost your super savings.
Doing this can not only help grow your super balance, but could also reduce your taxable income, and therefore the total taxes you pay.
Salary sacrifice contributions are included in the concessional (before-tax) contributions cap, along with the super contributions your employer makes for you and after-tax contributions you claim a tax deduction for. This cap is currently $30,000 pa.
From 1 July 2019, you can carry forward any unused portion of the concessional contributions cap for up to five previous financial years, depending on your total super balance.
Also, keep in mind that a salary sacrifice arrangement only relates to future salary, not past earnings. For example, you can salary sacrifice a pay bonus only if you entered into an agreement before you became entitled to your bonus.
See the difference salary sacrifice contributions can make:
Maria, age 50, makes salary sacrifice (before-tax) contributions
Maria is keen to add to her super, she earns $65,000 a year and found with taking a small reduction in take home pay, she can save tax and add to her savings. In the long term that could help save for her retirement.
This case study is provided for illustration purposes only and are not a representation of the actual benefits received or fees and costs that may be incurred. Key assumptions: Contributions tax 15%, SG 11.5% (for financial year 2024/25), tax saving calculations based on 2024/25 ATO resident income tax rates plus 2% Medicare levy and includes low-income tax offset. Results have been rounded to the nearest $1.
How do I make a salary sacrifice contribution?
If you have made the decision that salary sacrifice is right for you, you’ll need to set up a deduction from your before-tax pay through your employer. We recommend you have a chat to your employer or payroll to make sure you’re able to make before-tax contributions from your pay into your super account. Here are some steps to get started:
Step 1
Step 1
Ask your employer if they offer salary sacrifice, what your options are and any impacts it might have on your salary and benefits. You could also speak to a financial adviser to determine if salary sacrifice is right for you.
Step 2
Step 2
Complete and provide the Add to your super through your employer form to your employer or payroll department. Download this form from australiansuper.com/forms
How might salary sacrifice contributions affect your tax?
Salary sacrifice contributions can offer some tax benefits, but here are some things to keep in mind.
According to the ATO, salary sacrifice contributions do not:
- reduce ordinary time earnings (OTE - that is, salary or wages used to calculate your super guarantee)
- count towards the super guarantee amount.
That means your employer must still pay your super guarantee and salary sacrifice contributions are reportable super contributions.
Salary sacrifice amounts are considered ‘super contributions’, not ‘income’. They can therefore reduce your taxable income.
Claiming a tax deduction for after-tax voluntary contributions
You can also claim a personal tax deduction for any after-tax personal contributions you make to your super. Bear in mind, any after-tax contributions you claim a tax deduction for are counted toward your concessional contributions cap. Time limits and conditions apply.
Remember to tell us your Tax File Number if you haven’t already
You are not required to tell us your Tax File Number (TFN) but if you don’t, you’ll pay up to 47% tax on your before-tax contributions (this includes the Medicare levy) and we won’t be able to accept after-tax contributions from you. Log in to your account at australiansuper.com/login to provide your TFN.
Recommended reading
- Five Ways to Fast Track Your Super
- How much super should I have?
Tags:
-
Important Information
- Total superannuation balance - Australian Taxation Office - July 2024
- If you claim a tax deduction for after-tax contributions, your contributions will be classed as before-tax (concessional) contributions, and you will no longer eligible for the Government co-contribution in relation to those amounts.