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Boost your super

Super is seriously tax-friendly

2023-07-18 04:30

Super remains one of the most tax-effective ways to save for your retirement, so it's important to understand how you can best benefit from it, writes Gayle Bryant.

Superannuation provides an environment for you to accumulate your retirement savings and from a tax perspective it has few rivals.

It can help you tax-effectively save for your retirement in a number of ways, such as:

  • the money you contribute before tax (employer payments and salary sacrifice) is generally taxed at 15 per cent, which is lower than most people's marginal tax rates (additional 15% tax applies for high income earners)
  • investment earnings inside super are taxed up to 15 per cent.

The trade-off for these benefits is that your money is preserved until retirement, so you can't generally access it until you have reached your preservation age (55 to 60 years, depending on when you were born) and have retired or you reach age 65.

How much can you save?

The difference in tax outcomes you can get from contributing extra to super depends on the marginal tax rate that applies to your taxable income. The table below shows you the difference between marginal tax rates (as an individual taxpayer) and the tax rate for a superannuation fund taxpayer.

Marginal tax rates v super tax rates (current at July 2022)


* The above rates assume Medicare Levy of 2 per cent.

** This is for illustration purposes only and does not take into account any tax offsets or credits you may be entitled to.

*** Up to an additional 15 per cent may apply to concessional contributions that exceed the $250,000 income threshold for higher income earners.

Tax effective strategies that make the most of your super

Here are some tax-effective strategies that can give your super a boost.

Salary sacrifice or personal tax-deductible contributions

Making concessional contributions into super can be one of the most tax-effective strategies around. If you ask your employer to put some of your salary into super before it goes into your pay packet, this amount is generally taxed at 15 per cent instead of your marginal tax rate.

Be aware you can only contribute $27,500 per year to your superannuation at this concessional rate, including any employer contributions (for example, 11 per cent superannuation guarantee). (Refer to the need-to-know section below for details of the 'carry-forward' arrangement that began on 1 July, 2018).

There are some exceptions to the amount of tax on contributions you pay. For example, since 1 July 2017, if your income plus concessional contributions exceed $250,000, you pay up to an extra 15 per cent tax (up to a total of 30 per cent) on all or part of the concessional super contributions within your concessional cap.

Move savings into super for a tax-effective earnings boost

If you have a large amount of cash or other investments outside super that you don't need to access till retirement, you could consider moving them into super so that any investment earnings (including interest and capital gains) may be taxed at up to 15%. Just be aware of the personal tax implications if you're selling any investments to do this and remember that there are limits on the amount you can contribute to super.

Tax effectiveness of having life insurance through super

Life insurance that's available through your super fund may be more affordable than if you pay for it outside of super, which means you can potentially save money on the premiums and/or pay for a higher level of life insurance cover.

This is because when you take out insurance within super, your insurance premium may be paid from your pre-tax income (for example, pre-tax salary sacrifice to super or personal deductible contributions), which leaves you with a lower gross income amount on which to pay tax. Your super fund may also claim a tax deduction for the premium and may pass on this benefit to you. Generally you cannot claim a tax deduction for life insurance premiums paid for life insurance held personally.

Make the most of the spouse contribution rules

You may receive a tax offset of up to $540 by making a contribution to your spouse's super account. To receive the maximum tax offset requires a spouse contribution of at least $3,000 into your spouse's super account and your spouse's income must be $37,000 or less. To be eligible for a part spouse contribution tax offset your spouse's income must be less than $40,000. Additional criteria applies for a spouse to be eligible and it is important to note that contributions made to your own super fund then split to your spouse do not qualify for the spouse contribution tax offset.

Tax offset for low income earners

If you earn $37,000 or less, you may also qualify for the low-income superannuation tax offset. This amount, up to $500 each year, is 15 per cent of the concessional contributions you or your employer makes to your super throughout the financial year.

Need to know

Super remains one of the most tax-effective vehicles in which to save for your retirement. Below is a summary of some of the key legislated changes to super.

  • Generally you can only move up to $1.7 million of super savings into a retirement income stream if you have never commenced a retirement phase pension before 1 July 2021. For those who have commenced a pension before that date, you may have a lower limit.
  • Transition-to-retirement pensions are no longer considered a retirement-phase income stream and investment earnings are taxed at up to 15 per cent (in most cases pension payments from these super pensions continue to be tax-free if you are at least age 60).
  • Concessional contributions are capped at $27,500 in the 2023/24 financial year.
  • If you haven’t contributed up to the maximum concessional contribution cap in any one year since 1 July 2018 and your total superannuation balance last 30 June was less than $500,000, you can make more concessional contributions this financial year using any unused concessional caps since 1 July 2018. Any unused concessional caps in a financial year can be carried forward for 5 years.
  • Personal (non-concessional) super contributions are limited to $110,000 from after-tax savings in the 2023/24 financial year.
  • The downsizer contributions into superannuation measure allows eligible persons who are 55 years and over to make a contribution into their super of up to $300,000 using the sale proceeds of their home, without affecting their non-concessional cap.
  • From July 1 2022, the requirement to pass a work test was repealed for super contributors aged between 67 and 74 who wanted to make non-concessional or salary-sacrifice contributions into their super account. The work test, however, still applies for those ages 67 to 74 making personal contributions for which you intend to claim a tax deduction. To pass the work test, you must prove that you are gainfully employed, which requires you to be working and receiving an income for at least 40 hours in a period of 30 consecutive days during the financial year in which you wish to make super contributions. The 40 hours can be in any arrangement over the 30 consecutive days, and the 30 consecutive days can be at any time during the financial year.
Super is seriously tax-friendly

Explore how Superannuation can work for you

If you're looking for a super solution that's easy to take care of consider ANZ Smart Choice Super

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“ANZ Smart Choice Super” is a suite of products consisting of ANZ Smart Choice Super and Pension (PDF)ANZ Smart Choice Super for employers and their employees (PDF) and ANZ Smart Choice Super for QBE Management Services Pty Ltd and their employees (PDF). OnePath Custodians Pty Limited (ABN 12 008 508 496, AFSL 238346 RSE L0000673) (OPC) is the issuer of the ANZ Smart Choice Super suite of products. OPC is the trustee of the Retirement Portfolio Service (ABN 61 808 189 263, RSE R1000986) (RPS) and the ANZ Smart Choice Super suite of products are part of the RPS. You should consider obtaining financial advice before making any decisions based on the information. You should obtain a Product Disclosure Statement (PDS) relating to the relevant financial product and consider it before making any decision about whether to acquire or continue to hold the product. Target Market Determinations (TMDs) where required for relevant products have to be available for consideration by distributors/members. A copy of the PDS and TMD (where relevant) is available via the links above, and upon request by phoning 13 12 87 or by searching for the applicable product at The ANZ Smart Choice Super and Pension product is distributed by Australia and New Zealand Banking Group Limited (ANZ) (ABN 11 005 357 522).  We recommend that you read the ANZ Financial Services Guide (PDF), before deciding whether to acquire or continue to hold this product. View the ANZ Smart Choice Super and Pension Target Market Determination (PDF). ANZ Smart Choice Super for employers and their employees and ANZ Smart Choice Super for QBE Management Services Pty Ltd and their employees are MySuper compliant products issued pursuant to the latest PDS available at OPC is a member of the Insignia Financial group of companies, comprising Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (Insignia Financial Group). The Australia and New Zealand Banking Group Limited (ANZ) (ABN 11 005 357 522) brand is a trademark of ANZ and is used by OPC under licence from ANZ. ANZ and the Insignia Financial group of companies (including OPC) are not related bodies corporate. ANZ does not stand behind or guarantee these products.

Before re-directing your super or moving your money into ANZ Smart Choice Super, you will need to consider whether there are any adverse consequences for you, including loss of benefits (e.g. insurance cover), investment options and performance, functionality, increase in investment risks and where your future employer contributions will be paid. 

The information provided is of a general nature and does not take into account your personal needs, financial circumstances or objectives. Before acting on this information, you should consider the appropriateness of the information, having regard to your needs, financial circumstances or objectives. The case studies used in this article are hypothetical and are not meant to illustrate the circumstances of any particular individual. Opinions expressed in this document are those of the authors only.

All fees are subject to change. Other key features are relevant when choosing a super fund, including performance. Past performance is not indicative of future performance.

Taxation law is complex and this information has been prepared as a guide only and does not represent taxation advice. Please see your tax adviser for independent taxation advice. The information on insurance cover is a summary only of the terms and conditions applying to the insurance cover. To the extent there is any inconsistency with the terms of the insurance cover provided by the insurer, the terms of the insurance policy will prevail.

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Fee Analysis: Research conducted by SuperRatings Pty Ltd, holder of Australian Financial Services Licence No. 311880 at the request of OPC. For a copy of the latest SuperRatings research, click here (PDF) or call 13 12 87.