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New opportunities for Employees to make more tax effective contributions to their Super fund

Did you know you can now claim a tax deduction for making a personal contribution to your super?

Previously, most Employees were excluded from claiming a tax deduction for their personal contributions to super.

  • Their only real option was to commit to an ongoing Salary Sacrifice Arrangement with their employer if it was available.
  • Now, if your employer doesn’t offer Salary Sacrifice Arrangements (or you just want more flexibility in how you make extra contributions to your super), you can claim a personal tax deduction for personal contributions.

Read in this article

Why consider Salary Sacrificing additional money into super?

  • Salary sacrifice contributions are taxed at a maximum of 15% by your super fund
  • This tax rate is usually less than the tax you pay on your salary - which is about 32.5% for most people earning between $37,001 and $90,000

For many people, salary sacrifice can be useful as they effectively re-allocate what would otherwise be paid in tax to their super fund.

In a Salary Sacrifice Arrangement, you ask your employer to pay part of your before-tax salary to your super fund rather than paying it - and then taxing it - to you as a salary. This reduces the amount of your assessable income and with it, the amount of income tax you pay.

Why consider Personal deductible contributions into super as an alternative?

  • Not all employers offer a Salary Sacrifice Arrangement
  • Some employers will calculate your additional sacrifice contribution to reduce the amount of SG they must pay you
  • Not all people want to lock themselves into a formal arrangement that’s difficult to stop and start if needed

Compare the pair by the numbers

Generally, higher income earners gain the greatest benefit from either of these strategies. 

  • Depending on your income (and how much you can afford to contribute), a mix of both tax deductible and non-tax deductible super contributions may be a good option to discuss with your financial adviser.

The government's MoneySmart website has a calculator to help work out whether to make extra contributions before or after tax.

  • From a tax and super viewpoint, a personal deductible contribution has the same net effect as salary sacrifice, as you can see in the table below.

Personal Deductible
Contribution into Super

Salary Sacrifice
into Super
Original Taxable income $80,000 $80,000
Salary Sacrifice amount - $15,000
Personal Deductible
Contribution amount
$15,000 -
New Taxable income $65,000 $65,000
Tax payable in 17/18
(including Medicare levy)
$13,947 $13,947
Concessional Contribution
(excluding super guarantee)
$15,000 $15,000
Contributions tax $2,250 $2,250

Maximising additional contributions with an offset account

  • For people thinking about making personal contributions to their super fund once a year, consider saving your intended contribution in your mortgage offset account first until you're ready to make a personal super contribution.
  • Check out the ASIC SmartMoney Super v Mortgage Repayment Tool that compares the effect of making an additional contribution to super or paying off your mortgage.
Caution: Whether you opt for salary sacrifice or claim a personal deductible contribution to super, there are complex rules to be followed, so talk with us first about the right super contribution strategy for you.

author pic drew browneDrew Browne is a specialty Financial Risk Advisor working with Small Business Owners & their Families, Dual Income Professional Couples, and diverse families. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His business Sapience Financial Group is committed to using business solutions for good in the community. In 2015 he was certified as a B Corp., and in 2017 was recognised in the inaugural Australian National Businesses of Tomorrow Awards. Today he advises Small Business Owners and their families, on how to protect themselves, from their businesses.  He writes for successful Small Business Owners and Industry publications. You can read his Modern Small Business Leadership Blog here. You can connect with him on LinkedIn Any information provided is general advice only and we have not considered your personal circumstances. Before making any decision on the basis of this advice you should consider if the advice is appropriate for you based on your particular circumstance.

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