Understanding superannuation contributions and taxes

By adding a little bit extra to your super, you could enjoy more retirement savings and several tax benefits.

Making additional contributions to your super today is one of the best things you can do to help ensure your retirement years are comfortable.

There may also be tax incentives to adding a little extra into your super, so it’s important you understand how the tax rules work.

Understanding pre and post-tax contributions

There’s a few different ways you can add a little extra to your super. Most of these contributions will be classed as either ‘pre-tax’ or ‘post-tax’

Pre-tax contributions

Also known as concessional contributions, are contributed prior to your income being taxed. These include super being added by your employer (called Superannuation Guarantee) and salary sacrifice contributions. These contributions are subject to a super contribution tax of 15% (or 30% if your income is $250,000 or higher) which your super fund will automatically pay to the ATO on your behalf.

Post-tax contributions

Also known as non-concessional-contributions, are typically contributed with money that has already been taxed. These include personal-non concessional contributions as well as spouse contributions, and are not subject to a contribution tax.

There is a limit on the amount of pre and post-tax contributions you can deposit into your account each financial year, without tax implications – these are referred to as 'contribution caps'

Understanding the different contribution types

Depending on your situation, there are a number of different types of contributions you may choose to make to your super.

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  • Salary sacrifice

    Salary sacrificing is a method of contributing to your super, while also reducing the amount of income tax you pay.

    By asking your employer to contribute an additional amount of your take-home pay to your super account each time you're paid, money that otherwise would be paid as tax is deposited into your super account.

    For further information on salary sacrifice, please see our salary sacrifice page.

    Please note that salary sacrifice contributions count towards your concessional contribution cap.

  • Personal non-concessional contributions

    Non-concessional contributions are typically made with your after-tax money, such as funds in your savings account and are not subject to any tax when added to your super account. 

    You can generally make up to $110,000 of contributions each financial year (or up to $330,000 by using the ‘bring-forward’ rule

    These contributions aren’t subject to the super contribution tax of 15% unless you claim a tax deduction on these contributions (for further information on this please see the ‘Personal Concessional contributions’ section below).

  • Personal concessional contributions

    Making personal non-concessional contributions means you may be eligible to claim a tax deduction. Any of these contributions that you claim a tax deduction on will subsequently be considered a personal concessional contribution and count towards your concessional contribution cap.

    Contributing money to your super and claiming a tax deduction on it may partially offset taxes that would need to be paid.

    To claim this tax deduction you will need to complete and return to us a  ‘Notice of intent to claim or vary a deduction for personal super contributions’ form, available via the ATO’s website.

    This form will need to be returned to us no later than the day you lodge your tax return, or by 30 June of the financial year after the contribution(s) were made.

  • Spouse contributions

    To help bolster your spouse’s super balance, you might opt to contribute after-tax money on their behalf as a personal non-concessional contribution to their account. Depending on your situation, in addition to boosting your partner’s balance, you could also be eligible for a tax offset of up to $540, which you can claim as part of your tax return.

    For further information on spouse contributions, including eligibility criteria please see our spouse contributions page.

  • Contribution splitting

    Depending on your circumstances, you might prefer to provide your partner with some of your own super – this is known as contribution splitting.

    This allows you to split up to 85% of your concessional contributions for the previous financial year, such as super contributions from your employer or salary sacrifice payments, with an eligible partner.

    This contribution is unique in that although you’re making a concessional contribution from your account to your partner’s, the amount transferred does not count towards their concessional contribution cap. Please note that this movement of funds from your account does not reduce the amount of your concessional contribution cap used.

    For further information on contribution splitting, including eligibility criteria, please see our contribution splitting page.

  • Government co-contribution

    The Government co-contribution is an initiative of the Australian Government that aims to help low and middle-income earners add money to their super.

    Under the scheme, the Australian Government co-contributes to your super up to an amount of $500, if you make personal non-concessional contributions. The exact amount that the Government contributes will depend on both your income and how much you contribute in personal non-concessional contributions.

    To receive this contribution, you don’t need to take any additional steps once you’ve made your personal non-concessional contributions. The ATO, at the time of your tax return lodgement, will determine if you’re eligible, and, assuming that we hold your TFN on file, will automatically make the co-contribution payment to your super account.

    This contribution will not count towards either your concessional or non-concessional contribution caps.

    Please note that there is an eligibility criteria that must be met prior to the Government co-contributing to your super.

    For further information on the Government co-contribution, including eligibility criteria please see our factsheet.

  • Downsizer contribution

    For those members 60 years of age and older, you may be eligible to contribute up to $300,000 ($600,000 for a couple) to your super account, if the funds come from the sale of your primary residence, without it counting towards either of your contributions caps, or being subject to super contributions tax.

    There are a number of eligibility criteria that you will need to meet prior to being able to make a downsizer contribution. For further information on this criteria, as well as how to make a downsizer contribution please see the ATO’s website.

  • First home super saver scheme

    The first home super saver scheme allows people to make both concessional and non-concessional contributions to their super, and later withdraw up to $50,000 (made up of both the original contributions and their associated investment earnings) to be put towards purchasing a property to live in.

    Before you can withdraw money under this scheme there are a number of eligibility criteria that must be met.

    For further information on the First Home Super Saver Scheme, including eligibility criteria, please see our First Home Super Saver Scheme webpage.

Seeking advice

Prior to contributing to your account you may wish to seek financial advice. Our Helpline Advice team can provide financial advice about your super fund at no additional cost. You can make an appointment with this team by calling our Helpline on 1800 682 525 between 8am-7pm (AEST/AEDT), Monday-Friday.

Disclaimer: This document has been prepared and sent on behalf of Mercer Superannuation (Australia) Limited (‘Mercer Super’), ABN 79 004 717 533, Australian Financial Services Licence #235906, the trustee of the Mercer Super Trust ABN 19 905 422 981. Any advice contained in this document is of a general nature only, and does not take into account the personal needs and circumstances of any particular individual. Prior to acting on any information contained in this document, you need to take into account your own financial circumstances. Please consider the Product Disclosure Statement, Product Guide, Insurance Guide, and Financial Services Guide before making a decision about the product, or seek professional advice from a licensed, or appropriately authorised financial adviser if you are unsure of what action to take. 'MERCER' is a registered trademark of Mercer (Australia) Pty Ltd ABN 32 005 315 917. Copyright 2022 Mercer LLC. All rights reserved.