Choosing between pre and post-tax contributions
By now you know why you should be contributing to your super. The next question is: pre-tax or post-tax? In the years before you retire, how you contribute to your super can be just as important as how much you contribute.
Pre-tax contributions
Pre-tax contributions, also known as concessional contributions, are any contributions made by your employer (including employer Superannuation Guarantee SG and salary sacrifice contributions) and personal contributions for which you have claimed a tax deduction.
Making pre-tax contributions to your super can result in significant tax savings. Whether you will benefit from pre-tax contributions will depend on factors such as your marginal tax rate and personal circumstances.
Pre-tax contributions and take-home pay
The main advantage of pre-tax contributions is the potential to reduce your taxable income. Rather than taking this money as salary and paying marginal tax rates, the money you contribute to super on a pre-tax basis is taxed at 15% (which may be considerably lower than your marginal tax rate). For people on higher incomes, this can boost super savings with little difference in take home pay, as the following example demonstrates:
Kate’s gross income is $75,000 a year. She decides to make pre-tax contributions to her super of $150 a fortnight ($3,900 a year).
Kate’s take home pay is now only $105 less per fortnight than before she contributed – but her super savings will be boosted by $3,315 for the year (after contributions tax of 15%).
Use our Pre-tax vs Post-tax contributions calculator to help work out the effect of contributions on your take home pay.
Post-tax contributions
Post-tax contributions, also known as non-concessional contributions, include any contributions made from your post-tax salary. If you are a lower income earner or you have a non-working spouse, you may be better off making post-tax contributions. You’ll be able to take advantage of the Government co-contribution scheme and spouse tax offset, which only apply to post-tax contributions.
Access the spouse tax offset
If you make post-tax contributions on behalf of your spouse you may be eligible for a tax offset of $540*. You can claim an 18% tax offset on the first $3,000 of contributions you make each financial year on your spouse’s behalf, provided that their income is $10,800 or less. (You can get a partial offset if their income is over $10,800, but the offset no longer applies to income over $13,800.)
So, by redirecting some contributions, you may be able to access the offset and further boost your savings, while increasing your partner’s super.
More information is available in our factsheet Superfacts on Spouse contributions
Use our Spouse tax offset calculator to see if you would be eligible for a tax offset.
* Your partner must be under 65 years of age and currently living with you on a bona fide domestic basis as your husband, wife or defacto partner/spouse (current Government legislation does not include same-sex couples).
Combine co-contributions and spouse contributions
If you are a couple approaching retirement and one person is a full-time salary earner and the other a part-time worker, you may be able to boost your combined super savings by combining co-contributions with spouse contributions.
This is how it can work: one partner, generally the full-time worker on a higher salary, makes spouse contributions into their partner’s super. The other partner makes a personal post-tax contribution to their own super. The couple may then be eligible to receive a spouse tax offset (up to $540) and up to the maximum $1,500 Co-contribution.
More information is available in our factsheet Superfacts on Co-contributions
Use our Government co-contribution calculator to see if you would be eligible
More information is available in our factsheet Superfacts on Spouse contributions
Use our Spouse tax offset calculator to see if you would be eligible for a tax offset.
Reduce your income and access Government co-contributions
The Government’s co-contribution scheme means you may be eligible to receive contributions of $1.50 for every dollar you put into your super as a personal contribution, up to a maximum of $1,500 a year for $1,000 of contributions. To be eligible you must earn less than $60,342 pa. Full details of the Co-contribution scheme is available on the Types of contributions you can make page.
It may be possible to reduce your income below $60,342 pa by making pre-tax contributions and combining this with a post-tax contribution (super contributions made from pre-tax salary are not eligible for a co-contribution.) In this way you may be able to boost your super savings with your own contributions and benefit from co-contributions.
More information is available in our factsheet Superfacts on Co-contributions
Use our Government co-contribution calculator to see if you are eligible.
Contribution limits
Contribution limits apply to both pre-tax and post-tax contributions. Post-tax contributions have higher limits than pre-tax contributions, which may be of benefit if you are getting closer to retirement age and want to dramatically increase the amount of super you can access tax-free on retirement after age 60.
More information is available on contribution limits for accumulation members
More information is available on contribution limits for defined benefit members