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.

Case study: Crystal boosts her super by salary sacrificing

" "Crystal 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 $2,350 in tax, with the extra money going into her super fund.

Crystal's boost Does nothing Salary sacrifices $10,000
Take-home pay $67,403 $61,253
Tax $22,597 $18,747
Extra money into super $0 $8,500
Net benefit $67,403 $69,753 ($2,350 better off)

Assumptions: The figures used in this table are estimates only and are based on 2013/2014 income tax rates and a Medicare Levy of 1.5%.

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 $25,000, including your employer's 9.25% super guarantee contribution. This is called the concessional contributions cap.  There are higher concessional caps for people closer to retirement:

  • People aged 60 and over can contribute $35,000 including your employer's 9.25% super guarantee contribution.
  • From July 1, 2014 people aged 50 and over can contribute $35,000 including your employer's 9.25% super guarantee contribution.

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

Setting up salary sacrificing

If you want to sacrifice some of your salary to super you should enter into a formal agreement with your employer. It is best to include the details in your terms of employment. This ensures your employer calculates their 9.25% super guarantee contribution on your original salary.

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.

Government co-contributions

If you earn less than $48,516 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 $33,516 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.

To find out how much free money you can get, use our super co-contribution calculator.

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

" "Jay, 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

 Ewan, 26, earns $36,000 a year from his personal trainer job. Over the last financial year Ewan's employer puts $3,330 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

Use our super contributions optimiser to work out the best way for you to grow your nest egg.

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: 10 Dec 2013

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