Tax Planning Part 6: What is Superannuation in Australia?
- Arnold Shields
- Jun 10, 2024
- 3 min read
Updated: May 12
Superannuation, commonly known as “super”, is a vital part of retirement planning in Australia. Beyond just saving for your golden years, it’s one of the most tax-effective ways to build wealth. This guide outlines how super works, how to take advantage of the tax benefits, and the contribution strategies you can use to get ahead.
What Is Superannuation?
Superannuation is a compulsory savings system where employers must contribute a percentage of your wages into a super fund. These contributions are invested over time to help fund your retirement.
Current Superannuation Guarantee (SG) rate: 11%
Scheduled increase: Rising to 12% by 1 July 2025
You can also make voluntary contributions to further grow your balance—and that’s where the tax advantages really kick in.
Why Superannuation is a Tax Winner
Super offers unique tax benefits not available through ordinary investment accounts:
15% Concessional Tax RateContributions and earnings in a super fund are taxed at a flat rate of 15%, which is much lower than most individual tax rates.
Tax DeductionsIf you make personal contributions (within the concessional cap of $27,500/year), you may be eligible for a tax deduction—lowering your taxable income.
Tax-Free WithdrawalsOnce you reach age 60, withdrawals from your super are generally tax-free.
Smart Super Contribution Strategies
1. Salary Sacrifice
Directing part of your pre-tax income into your super fund reduces your taxable income and boosts your super at the same time.
Example:Earn $100,000? Salary sacrifice $10,000 and only pay tax on $90,000. The $10,000 is taxed at 15% in your fund instead of your higher marginal rate.
2. Personal Deductible Contributions
Perfect for self-employed individuals or those not offered salary sacrifice. These are personal contributions you can claim as a tax deduction—also taxed at just 15%.
3. Non-Concessional Contributions
Made from your after-tax income, these are not taxed again in the fund. While they don’t offer immediate tax relief, they benefit from tax-free growth within your super.
Annual cap: $110,000
Bring-forward rule: Up to $330,000 over three years
4. Spouse Contributions
Support your spouse’s super (if they’re a low-income earner) and earn a tax offset of up to $540 for contributions up to $3,000.
5. Government Co-Contribution
If your income is under $42,016 and you contribute $1,000 after-tax, the government could contribute up to $500 to your super.
Managing and Choosing the Right Fund
Not all super funds are created equal. Choose between:
Retail Funds
Industry Funds
Self-Managed Super Funds (SMSFs)
Public Sector Funds
Corporate Funds
Compare investment options, fees, and performance to make sure your fund aligns with your goals.
Take Control of Your Retirement
Superannuation is more than a savings account, it’s a strategic wealth-building tool. Use it wisely, and it can reduce your tax burden and help secure your future.
Need help?
At Dolman Bateman, we offer tailored financial advice to help you get the most out of your superannuation. Call us on 02 9411 5422 to book a personalised strategy session.
Stay tuned for more insights in our tax planning series.
Disclaimer:
The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.
