Tax benefits from Voluntary Superannuation Contributions

When you retire, your superannuation is likely to become an essential source of your income. That’s why it’s a good idea to top it up while you are working. But did you know there are also some great tax benefits you can take advantage of right now – just by making your voluntary superannuation contributions?

Generally, money invested in super is taxed at a lower rate than your personal income tax rate. In the lead-up to 30 June 2025, we want you to know about opportunities to save tax with super contributions.

Our advisors have prepared the following tax planning article, which explains the benefits for both low—and high-income earners.

Please note: this is not financial advice. If you are interested in this strategy, please contact our office to speak with one of our licensed financial advisors before you do anything.

There are several ways you can get tax benefits from super contributions:

1. How “Concessional” Super Contributions are Taxed

Concessional (before tax) super contributions include employer super contributions made on your behalf, any salary sacrifice contributions you make, or any personal contributions you claim a tax deduction on in your tax return. These contributions are taxed at 15% when they are received by your super fund (up to a limit of $30,000 per year), provided your annual earnings combined with superannuation contributions are less than $250,000 annually.

Personal super contributions are especially useful for people with higher marginal tax rates or if their employer refuses to set up a salary sacrifice arrangement.

The people who would benefit the most are those who earn above $45,000 per year, as this is where the marginal tax rate plus Medicare Levy rises to 34.5%. Claiming a tax deduction on super contributions effectively makes your tax rate only 15%. That’s a big tax saving!

2. Catch Up Super Contributions

If you haven’t made maximum annual super contributions in any year from 2020 onward, you can make “carry-forward” concessional super contributions if you have a total superannuation balance of less than $500,000 at 30 June the prior year. You can access your unused concessional contributions caps on a rolling basis for five years. This means if you don’t use the full amount of your concessional contribution cap ($25,000 for 2020 and $27,500 for 2021 to 2024), you may qualify to carry forward the unused amount and take advantage of it up to five years later.   Amounts carried forward that have not been used after five years will expire.

3. How low-income earners are taxed

If you’re a low-income earner (earning up to $37,000 per year), the low-income superannuation tax offset ensures that you don’t pay a higher tax rate on your super contributions than your income tax rate. The offset will be paid directly to your super account and will equal 15% of your concessional contributions for the year, capped at a maximum of $500.

Individuals who earn between $43,445 and $58,445 during the 2024 financial year may also be eligible for 50 cents for each dollar in government super co-contributions, up to a maximum of $1,000 in non-concessional (after-tax) contributions.

4. How high-income earners are taxed

If you earn more than $250,000 a year (including super contributions), your concessional contributions are taxed at an additional 15%, bringing the total tax on these contributions to 30%. However, this is still less than your marginal income tax rate of 47%. This extra 15% is known as Division 293 tax.  Only the concessional contributions which make your total income exceed $250,000 are subject to the additional tax.

If your concessional contributions exceed the concessional contributions cap of $27,500 per year, the excess is included in your tax return and taxed at your marginal tax rate (less an allowance for the 15% already withheld by your super fund). You can choose to withdraw some of the excess contributions to pay the additional tax.

How Morrows Can Help:

Our Morrows Advisors need to check many things for you to ensure you don’t exceed your super caps. You may need to seek the advice of a licensed financial advisor, and you must get the paperwork right. The timing of your contributions is crucial to getting right so that you can claim a tax deduction for them in 2025.

Contact your advisor today! The sooner we get started; the sooner we can help you save tax – well before 30 June for enough time to implement tax-saving strategies.

Want to learn more Tax Minimisation Strategies?

Our advisors have prepared two 2025 Tax Minimisation guides. These guides outline the various strategies we can consider helping reduce your personal or business tax bill this financial year. Fill in your details below, to gain access to these guides for free.