Thinking about adding to your super but don’t know where to begin? The good news is building your super can be simple, and even small things you do now to boost your super balance can reap rewards later.
MAKE your super count
The Federal Government offers tax incentives if you make extra super contributions, which makes super one of the most effective ways to build your retirement savings.
You can make extra super contributions with before-tax or after-tax dollars, or both. The way in which you make those contributions will determine whether or not you are eligible for any additional concessions or tax benefits.
This page outlines what you should consider when making super contributions as well as explaining the super saving opportunities.
As always, we can assist you with any questions you may have about the different ways you can contribute to your super.
It’s your super, so make the most of it.
Salary sacrifice
What is salary sacrifice?
Salary sacrifice is an agreed arrangement with your employer* for you to receive part of your gross salary as a benefit rather than as a salary. The value of this benefit is paid from your gross salary, i.e. before tax. This means that your gross salary is reduced by the cost of the benefit before tax is calculated.
* Your employer may have restrictions on the amount you can salary sacrifice and/or the frequency that you can change your election.
Tax savings with salary sacrifice
The most popular form of salary sacrifice is contributing an amount into super from your gross salary. There are some tax benefits in doing this.
Firstly, sacrificing some of your salary into super reduces your taxable salary. As a result, you may pay less income tax.
Secondly, while no income tax is levied on the contribution amount sacrificed out of your salary, tax is levied on this amount when it enters the super fund. This tax rate is 15% (except if your annual income exceeds $250,000; you will pay 30% tax on some or all of your concessional contributions) which may be lower than your marginal income tax rate.
Is salary sacrifice for you?
It is important to remember that salary sacrifice reduces your take home pay. However, depending on your level of income, salary sacrifice can be a very tax-effective way to contribute to your super.
Incentives for low and middle income earners and the availability of rebates in relation to spouse contributions means that salary sacrifice may not always be the most tax efficient method to contribute to super.
Further, there is a limit on the amount of before-tax contributions (called concessional contributions) that can be made in each financial year. Refer to 'Super limits' below for full details.
What’s best for you depends on your particular circumstances. Before making any decisions to salary sacrifice into super, you should consider speaking to a financial planner.
To start this process, you should consider your marginal tax rate. This can be a significant factor in determining any potential tax savings through salary sacrifice.
Consider your marginal tax rate
The table below shows the marginal tax rates applying at different levels of income (e.g. salary and wages) for the 2023/24 financial year.
| Taxable income | Tax rate† |
|---|---|
| 0–$18,200 | Nil |
| $18,201–$45,000 | 19c for each $1 over $18,200 |
| $45,001–$120,000 | $5,092 plus 32.5c for each $1 over $45,000 |
| $120,001–$180,000 | $29,467 plus 37c for each $1 over $120,000 |
| $180,001 and over | $51,667 plus 45c for each $1 over $180,000 |
Put simply, if your taxable income is over $18,200 you can obtain an immediate tax saving through sacrificing part of your salary and contributing that amount into super. This is due to your marginal tax rate being higher than the 15% tax on super contributions (except if your annual income exceeds $250,000, then you pay 30% tax on some or all of your concessional contributions).
However, there could be some tax considerations if you plan to access your super before you reach the age of 60. This is discussed in ‘Taxes on your super’.
† A Medicare levy of 2% is usually payable in addition to the above tax rates.
Government Co-contribution
The Government Co-contribution is an initiative whereby the Federal Government contributes up to 50 cents for every $1 you personally contribute (in after-tax dollars) to your super. The maximum amount the government will contribute is $500 per annum. This maximum starts reducing once your assessable income exceeds $43,445 and reduces to zero once your income reaches $58,445.
To be eligible, you need to:
- make after-tax contributions to a complying super scheme
- have assessable income determined by the Australian Tax Office (ATO) of less than $58,445 for the 2023/24 financial year
- have 10% or more of your total income from eligible employment, running a business or a combination of both
- be less than 71 years of age at the end of the financial year
- be a permanent resident of Australia
- lodge an income tax return for the relevant financial year
- have provided us with your tax file number (TFN)
- have a total superannuation balance of less than the transfer balance on 30 June of the year before the relevant financial year ($1.9 million for the 2023/24 financial year) and
- have not exceeded your non-concessional contributions cap in the financial year.
The following contributions are not eligible to receive the Government Co-contribution:
- Super Guarantee (compulsory super paid by your employer contributions)
- salary sacrifice contributions
- contributions for which a tax deduction is claimed
- spouse contributions.
If you're self-employed you can also claim a full deduction for your super contributions as well as receiving a co-contribution in respect of any eligible after-tax contributions.
The critical message in relation to the Government Co-contribution is that you should first maximise your entitlement to any co-contribution that may be available before looking at other ways to contribute to super. This is because your eligible personal contribution attracts a maximum 50% matching contribution from the Federal Government, i.e. the Federal Government matches up to a maximum of 50% of your contribution and then you receive investment earnings on the whole amount.
Co-contribution examples
Total income (p.a.) | Maximum co-contribution available | Contribution needed to receive |
Up to $43,445 | $500 | $1,000 |
$46,445 | $400 | $800 |
$49,445 | $300 | $600 |
$52,445 | $200 | $400 |
$55,445 | $100 | $200 |
$58,445 and above | $0 | $0 |
Spouse contributions
You may be entitled to a tax concession from the Federal Government if you make an after-tax contribution into your spouse’s super account.
Spouse rebate
If you make eligible spouse‡ contributions to super on behalf of your partner, you can claim a tax rebate (also called a tax offset) of 18% on the contributions, up to a maximum contribution of $3,000 per annum. This is provided your spouse receives $37,000 or less in assessable income, reportable fringe benefits and reportable employer super contributions for that year.
When your spouse is receiving more than this amount and you make contributions of $3,000 or more, you can achieve the maximum rebate of $540 (18% of $3,000). The contributions eligible for the rebate reduce by $1 for each $1 of assessable income and reportable fringe benefits above $37,000 per annum. The rebate is not available if your spouse’s income reaches $40,000 or more per annum.
Further eligibility requirements for claiming the spouse rebate are that the super contribution must be:
- made with after-tax money
- made on behalf of a spouse who is under age 75 and an Australian resident.
As spouse contributions are made from after-tax money, they retain their tax-free nature and are available on retirement tax-free subject to preservation rules.
‡ To be entitled to the rebate, you must have a spouse that qualifies as a spouse within the meaning of that term in the tax law. A spouse for this purpose includes legal partners, de facto partners, and same sex partners.
Tax deductible personal contributions
Making a personal super contribution is a great way to give your super investment a boost and reduce your tax bill at the same time.
If you make a personal super contribution to your account and notify us that you intend to claim a tax deduction, the amount of that contribution can be deducted from your assessable income, reducing your personal tax bill for the current financial year.
How much can you contribute?
There is an annual cap of $27,500 on pre-tax or concessional personal contributions and this amount includes any super contributions paid by your employer plus any other tax-deductible personal contributions you make to your super account.
If you have more than one super account, this annual cap applies to all the concessional contributions made to any of your accounts.
From 1 July 2018, if your total superannuation balance is less than $500,000 and you have not used your full concessional contributions cap, you may be entitled to carry forward any unused concessional contributions cap amounts for up to 5 years.
So there is a limit to the amount you can contribute and still claim a tax deduction on for the current financial year. This amount will depend on your level of income and if you have made any concessional contributions to your super account this financial year, including any salary sacrifice contributions.
What steps do you need to take?
To be eligible to claim the tax deduction you must complete all of the following steps:
- Check how much you can contribute to your super fund. If you would like some help call us on 1300 547 873.
- Print and complete the Notice of intent to claim or vary a deduction for personal super contributions (NAT 71121) form and email or mail it to us.
- Make the contribution to your super account by the end of the financial year via BPAY or Electronic Funds Transfer (EFT).
- Ensure you receive a written confirmation of your intention to claim from us.
- Complete the section in your income tax return for personal superannuation contributions.
It’s important that you have received written confirmation from us before you complete your tax return.
For more detailed information, see how to make a claim on the ATO website.
Making your contribution
You can make a contribution into your super account via BPAY or EFT. For more information, simply log into Member Online and go to ‘Payment options’. We cannot accept personal contributions if you have not provided us with your Tax File Number.
Email or mail to us
To send us your completed ATO form, please mail to:
ACTIVE SUPER
Po Box N835
GROSVENOR PLACE NSW 1220
You can also email your form to admin@activesuper.com.au
Need some help?
If you are intending to make a large contribution to your super, it may be beneficial to get financial advice first.
Taxes on your super
Contributions tax
There is a 15% tax on certain contributions as they are paid into super. All employer contributions (including salary sacrifice contributions) attract this tax (except if your annual income exceeds $250,000, then you pay 30% tax on some or all of your concessional contributions).
Contributions deducted from your salary after tax (i.e. not salary sacrificed) do not attract this tax because you have already paid income tax on them. These types of after-tax contributions are referred to as either personal contributions or non-concessional contributions.
Less tax on investment earnings in super
One of the big attractions of investing money into super is that your investment earnings are taxed at a maximum rate of 15%, which is lower than personal tax rates for incomes over $18,200.
Investment returns to our members are reflected as after tax rates and after allowing for all of the allowable tax concessions relevant to superannuation investments.
Withdrawing your super
Most people cannot access their super until retirement after age 55 (if you were born prior to 1 July 1960), increasing to age 60 (if you were born after 30 June 1964).
After age 60, super withdrawals are tax-free. For people under 60 there are two components of a super benefit: a tax-free and a taxable component. For people aged 55–59, only the part of the taxable component in excess of the tax-free limit is taxable at 15%. For members aged less than 55, no tax-free limit applies and the taxable component is taxed at 20%. These tax rates do not include the Medicare levy which will also be payable.
It is important that you seek financial advice from a financial planner before accessing your super.
Other Federal Government concessions
Low income superannuation tax offset (LISTO)
This assistance to low-income earners provides a super contribution of up to $500 annually for individuals on adjusted taxable incomes of up to $37,000.
The amount payable under this assistance is calculated by applying a 15% matching rate to the concessional contributions made by or for individuals on adjusted taxable incomes of up to $37,000 with an annual maximum amount payable of $500 (not indexed). The amount is paid directly into your super account to help you boost your retirement savings.
Concessional superannuation contributions (such as your Superannuation Guarantee) made from 1 July 2017 are eligible for this government contribution.
Avoid unnecessary tax
Under superannuation law, if you haven’t provided your Tax File Number (TFN) to your super fund by 30 June of each financial year, all your concessional contributions (i.e. before-tax contributions) that exceed $1,000 will be taxed at the top marginal tax rate, i.e. 45%, plus the Medicare levy.
For accounts established after 1 July 2007, the $1,000 threshold does not apply and you cannot make after-tax contributions at all unless you have disclosed your TFN.
So make your super count by supplying your TFN to your super fund today and avoid paying too much tax.
Compare your options
Making contributions before and after tax
When you compare pre-tax and post-tax super contributions, there is a significant tax advantage for most people if you choose to sacrifice some of your salary to make extra pre-tax super contributions.
Super salary sacrifice example
| So, you want to contribute an extra $100 per week to your super. Here’s how it could work if your marginal tax rate¶ is: | 19% | 32.5% | 37% | 45% |
|---|---|---|---|---|
| To invest $100 after tax into your super, it would cost you this much in gross income: | $123.46 | $148.15 | $158.73 | $181.82 |
| Because this is the amount of tax you would have to pay at your normal marginal rate: | $23.46 | $48.15 | $58.73 | $81.82 |
| Which would give you $100 after tax into your super account: | $100.00 | $100.00 | $100.00 | $100.00 |
| But if you made the same contribution with before tax money via salary sacrifice: | $123.46 | $148.15 | $158.73 | $181.82 |
| Your contribution is only taxed at 15%:§ | $18.52 | $22.22 | $23.81 | $27.27 |
| Making a total net contribution to super of: | $104.94 | $125.93 | $134.92 | $154.55 |
| The extra amount going into your super account each week (compared to the after-tax $100 contribution) is: | $4.94 | $25.93 | $34.92 | $54.55 |
| Which translates annually into: | $256.88 | $1,348.36 | $1,815.84 | $2,836.60 |
¶ Excludes Medicare levy.
§ If your annual income exceeds $250,000, you will pay 30% tax on some or all of your concessional contributions.
Salary sacrifice vs co-contributions vs spouse contributions
So far we’ve explained how salary sacrifice works for super contributions, the incentives for low and middle income earners and the availability of rebates in relation to spouse contributions.
The table shows that the type of super contribution that has the greatest value largely depends on your marginal tax rate.
However, it is very important to remember that there is a limit to the amount of co-contribution available. Once the maximum co-contribution is reached, it is worth considering an alternative type of contribution.
Consider your options carefully and ask us for help if you still have any questions.
| Marginal tax rate¤ | 19% | 32.5% | 37% | 45% |
|---|---|---|---|---|
| 1. Co-contribution example: If I make a $100 after-tax contribution to my super and I’m eligible for co-contribution entitlements, this will provide a total net benefit of: | $150.00∏ | $150.00≠ | $100.00± | $100.00± |
| 2. Salary sacrifice example: If I reduce my after-tax salary by $100 and use this to contribute to super via salary sacrificeƒ, in net figures it will give me: | $104.94 | $125.93 | $134.92 | $154.55 |
| 3. Spouse contributions example: If I contribute $100 after-tax to a spouse account≡, this will provide a total net benefit of: | $118.00 | $118.00 | $118.00 | $118.00 |
¤ Excludes Medicare levy.
∏ The maximum co-contribution assumes a total income of less than $43,445 per annum for the 2023/24 financial year.
≠ Assumes a total income of $45,001 per annum and 50% matching rate up to a maximum co-contribution of $500 each financial year.
± At the level of income required to be paying this rate of tax, there is no co-contribution available – see ‘Government Co-contributions’ section above for more information.
ƒ Salary sacrifice contributions to super attract only 15% tax (except if your annual income exceeds $250,000, when you then pay 30% tax on some or all of your concessional contributions).
≡ Assumes the full rate of spouse contribution rebate (offset) – see the ‘Spouse contributions’ section above. The rebate ($18) is not added to the super account but is given as a reduction in the contributing spouse’s tax. So, the amount of $118 represents the $100 payment to your spouse’s account plus the $18 rebate to you, the contributor.
Before considering whether to salary sacrifice, you should consider:
- Once your money is in super, generally you cannot access it until you reach preservation age and meet a condition of release;
- Amounts that are salary sacrificed contribute towards your concessional contributions cap and if you go over the cap, you may have to pay extra tax.
Preservation
There are restrictions on when and how you may access your super. Generally, you cannot access your super benefits until retirement on or after your preservation age.
The preservation age is 55 years for those born before 1 July 1960, increasing to age 60 for those born after 30 June 1964.
If you make spouse contributions and your spouse has never been employed before age 65, all contributions and investment earnings are preserved until age 65.
If your spouse has been gainfully employed at any time, the benefit arising from the spouse contributions is only accessible when your spouse retires after they have attained their preservation age. Depending on your spouse’s date of birth, this will be between the ages of 55 and 60.
Super limits
When making either before-tax or after-tax contributions to super, be aware that the Federal Government has imposed a number of limits to the amount of contributions you can make.
Before-tax contributions
You are allowed to make before-tax contributions to super until you turn 75 (although the Superannuation Guarantee applies to any age).
The concessional cap is $27,500 per annum regardless of your age.
From 1 July 2018, if your total superannuation balance is less than $500,000 and you have not used your full concessional contributions cap, you may be entitled to carry forward any unused concessional contributions cap amount for up to 5 years.
Contributions within the cap are taxed at 15%, except if your annual income exceeds $250,000, some or all of your concessional contributions may be taxed at 30%.
If you exceed your concessional cap you may have to pay extra tax.
After-tax contributions
After-tax contributions to super are limited to $110,000 per year if you are 75 years or younger.
If you are younger than 75, you can also average out these contributions to a limit of $330,000 over three years (i.e. bring forward your limit for the next two years) if your total superannuation balance as at 30 June 2023 is less than $1.68 million. For example, a person under age 75 can make up to $330,000 of contributions in the 2023/24 financial year, but then would not be able to make further after-tax contributions until the 2026/27 financial year.
The amount you can 'bring forward' will depend on your total superannuation balance at the end of the previous financial year. Your total superannuation balance is the combined total of all your super accounts. If your total superannuation balance is equal to or more than the general transfer balance cap ($1.9 million for the 2023/24 financial year) on 30 June of the previous financial year you are not eligible to make after-tax contributions.
Any contributions you make within these limits do not attract tax when you withdraw them from super.
Any contributions above the limit do attract an additional tax at the top marginal tax rate plus the Medicare levy (despite having already been taxed).
Super splitting
Super splitting allows for all or part of your contributions to be effectively transferred to your spouse’s name without any tax affecting the transfer. Splitting super contributions with your spouse can be a tax-effective strategy if one or both of you expect to start receiving super benefits before age 60.
You may also prefer to split super with your spouse for personal reasons. However, after-tax (non-concessional) contributions cannot be split with your spouse, although you can split your before-tax (concessional) contributions.
As always, you should seek financial advice from a financial planner to determine what options best suit your circumstances.
Combine your super
Do you have your money in more than one super fund? One of the easiest ways to make your super count is to combine these into a single account.
Most super funds charge both a fixed and variable fee to manage your retirement savings. Over the years, these costs add up and eat into your savings. This could cost you thousands of dollars by the time you retire. You also lose out on the compounded returns that this money could have earned if it was invested over the years.
In general, combining your super is a good idea but there may be exit fees involved or you may no longer have access to certain benefits, such as insurance, at the destination fund.
You can combine your super in just a few clicks.
And don’t forget, if you ever leave your employer, there’s no need to leave Active Super. You can remain a member of Active Super and continue to receive a range of great benefits including:
- Competitive fees and charges
- Professional and affordable financial advice
- Sustainable long-term returns
- Competitive life insurance cover
- Pre-retirement seminars and personal interviews
- Profits returned to members.
