Why your employer’s 12% is just the starting point
Your employer now contributes 12% of your ordinary earnings into super, a milestone reached on 1 July 2025 after more than three decades of gradual increases. That’s meaningful progress, but for most Australians it’s still not enough to fund the retirement they’re imagining.
The good news? Topping up your super, even modestly, can be one of the most tax-effective financial decisions you make.
The two ways to contribute more
There are two types of personal contributions, and both offer compelling benefits:
- Concessional (before-tax) contributions. This includes salary sacrifice and personal deductible contributions. The concessional contributions cap for 2025–26 is $30,000, which includes everything your employer pays plus anything you add concessionally. Provided your income is less than $250,000, concessional contributions are taxed at just 15% entering your fund, significantly less than most people’s marginal tax rates of up to 47% including the Medicare levy.
- Non-concessional (after-tax) contributions. Contributions from money you’ve already paid tax on. The non-concessional cap is $120,000 for 2025–26, and if your total super balance was below $1.76 million at the start of the year, you can use the bring-forward rule to contribute up to $360,000 in a single year (in a three-year period).
Three strategies worth knowing
- Salary sacrifice. Redirecting pre-tax pay into super, may reduce your taxable income and turbocharge your balance simultaneously.
- Carry-forward contributions. If your total super balance is below $500,000 on 30 June of the previous tax year), you can carry forward unused concessional cap amounts from the previous five financial years, potentially allowing a much larger tax-deductible contribution in one hit. This window closes for unused amounts from 2019–20 after 30 June 2026.
- Government co-contribution. If you earn $62,488 or less and make after-tax contributions, the government will match up to $500 of your personal contributions, essentially free money. However, there are other requirements to meet to qualify for the co-contribution.
A heads-up for high earners and low earners alike
If your combined income and concessional contributions exceed $250,000, an additional 15% tax known as Division 293 tax applies to superannuation contributions.
Conversely, low-income earners on $37,000 or less can receive a Low Income Super Tax Offset (LISTO), a government payment of 15% of their concessional contributions, up to $500, effectively refunding the contributions tax already paid by their fund.
Act before the cap increases
From 1 July 2026, the concessional cap rises to $32,500 and the non-concessional cap increases to $130,000. While higher caps are welcome, acting now, particularly to use carry-forward amounts before they expire, is worth a conversation with your adviser.
Every dollar you contribute today compounds inside a low-tax environment for potentially decades. The best time to start was yesterday; the second-best time is now.
The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.
