Contributing extra to super

Super building blocks

Making super contributions is a great way to boost your nest egg. You can build your super by making after-tax contributions from your own money or by salary sacrificing.

Salary sacrificing

You've probably heard someone talking about 'salary sacrifice' at your family barbeque. But what does it actually mean? If you earn more than $37,000, salary sacrifice can be a good way to grow your super. It involves giving up some of your pay and putting it into your super instead. You will save tax and boost your super.

Salary sacrificing is when you ask your employer to redirect a portion of your pay as a contribution to super. By 'sacrificing' some of your before-tax salary and putting it into your super fund, you get taxed at the special rate of 15%. That's why it's also known as 'concessional contributions' because there are tax concessions with these types of contributions. This suits higher income earners due to their higher marginal tax rate.

Changes to super contributions in 2017

Super contribution limits will change on 1 July 2017. Find out more details on what is changing and how it will affect you on the Australian Tax Office (ATO) website.

Super concessional caps

There is a limit on how much you can put into super each year by salary sacrifice.

Most people can contribute up to $30,000, including your employer's 9.5% super guarantee contribution. This is called the concessional contributions cap. 

There are higher concessional caps for people closer to retirement, people aged 50 and over can contribute $35,000 including your employer's 9.5% super guarantee contribution.

For more details see the ATO's information on key superannuation rates and thresholds.

Case study: Crystal boosts her super by salary sacrificing

Woman in her workplace showing how to use equipmentCrystal earns $90,000 before tax, excluding her employer's super contribution.

If Crystal decides to redirect $10,000 of her pay into salary sacrifice super contributions, she will save $2,400 in tax, with the extra money going into her super fund.

Crystal's boost Does nothing Salary sacrifices $10,000
Take-home pay $66,953 $60,853
Tax $23,047 $19,147
Extra money into super $0 $8,500
Net benefit $66,953 $69,353 ($2,400 better off)

Assumptions: The figures used in this table are estimates only and are based on 2016/2017 income tax rates and a Medicare Levy of 2%.

Warning - Setting up salary sacrificing and super guarantee payments

If you want to sacrifice some of your salary to super it is very important that you enter into a formal written agreement with your employer. It is best to include the details in your terms of employment.

Setting up a formal agreement ensures your employer calculates their 9.5% super guarantee (SG) contribution based on your original salary. If this is not agreed, your employer may be entitled to reduce their usual contribution by the total amount you salary sacrifice or pay a lower contribution base on your new 'reduced' salary.

Make sure to check you're getting what you're entitled to. Do this by checking online or by reading your annual statement from your super fund.

If you think you're not getting paid the correct amount of super talk to your employer. Ask how often they're paying your super, which fund they're paying it to and how much they're paying.

If your employer is not paying your super, report it to the ATO here: Report unpaid super contributions from your employer.

See the ATO for more details on salary sacrifice arrangements for employees.

You can also read our webpage on salary packaging.

After-tax contributions

After-tax contributions are known as 'non-concessional contributions' because you don't receive a tax deduction. After-tax contributions are the simplest way to add to your super as you simply deposit your personal money into your super account.

If you can spare the money, you can really boost your super savings by making after-tax contributions. You will usually save more by investing through super than by investing in the same assets outside super.

Contributions from your after-tax income don't get taxed when your fund receives them because you have already paid tax.

However, there are limits to how much you can contribute to your super before you have to pay tax. See the Australian Taxation Office's information on super contributions - too much super can mean extra tax.

Video: What happens if you go over the super contributions caps?

Super contributions caps

Making extra contributions is an effective way to grow your super. But what happens if you go over the contribution caps? Watch this video from the ATO to find out.

Transcript: What happens if you go over the super contributions caps?

Government co-contributions

If you earn less than $51,021 per year (before tax) and make after-tax super contributions, you are eligible to get matching contributions from the government. This is called the government co-contribution.

If you earn less than $36,021 the maximum co-contribution is $500 based on $0.50 from the government for every $1 you contribute. And just like that - you've made a 50% return on your money! The amount of the co-contribution reduces the more you earn.

Find out how much co-contribution you can get.

Super co-contributions calculator

How can I get the government co-contribution?

To receive the co-contribution you will need to lodge a tax return for the year.

The government will then work out how much you are entitled to. Assuming you're eligible, the government will pay the co-contribution directly to your fund. See the ATO for more details on super co-contributions.

Case study: Jay gets a co-contribution from the government

Man working out his superannuation contributionsJay, 40, earns $28,000 a year from his part-time job. He decides to pay an additional $40 per fortnight into his super fund. This small but regular step will grow Jay's super significantly over time. In addition, he qualifies for a super co-contribution from the government.

By the time Jay retires at 65, these additional amounts have boosted his super by thousands of dollars.

Low income super contribution

If you are eligible and earn $37,000 or less per year, the government may make a further contribution to your super. This amount, up to $500 annually, will be 15% of the before-tax contributions you or your employer made to your super account during the financial year.

You don't need to apply - the ATO will work out your eligibility and it will be paid directly into your super account. Make sure your super fund has your tax file number so you don't miss out on the payment. If you are eligible, you will receive the payment whether or not you lodge a tax return. However, if you don't lodge a tax return the process will take up to 14 months.

See the ATO's information on the low income super contribution.

Case study: Ewan gets a low income super contribution from the government

 Young man thinking about his superannuation contributionsEwan, 26, earns $36,000 a year from his job as a personal trainer. Over the last financial year Ewan's employer puts $3,420 into his super account.

Because Ewan provided his tax file number to his super fund the ATO is able to work out that he is eligible for a low income super contribution from the government. After Ewan lodges his tax return the government adds $500 to his super account.

Getting the most out of your super contributions

To help you work out the best way for you to grow your nest egg, we've developed a super contributions optimiser. This will help you decide whether it's better for you to make before or after tax contributions, or a combination of both.

Even small contributions can make a big difference over time.

Super contributions optimiser

Contributing extra to super can really boost your super nest egg. But make sure you know all the rules and consider the different ways to contribute more to super before you dive in. Start with our range of super and retirement calculators.

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Last updated: 23 May 2017