Feeling guilty about deciding between paying down your mortgage or topping up your super?
After all putting extra money into your mortgage means you can pay off your debt quicker and save interest, but putting extra money into super builds your retirement nest egg.
Sounds like an impossible choice?
Well, relax, you’re not alone. The Government's MoneySmart website has a decision calculator dedicated to this thorny issue to help people think through their situation called, Super v Mortgage Tool.
If the idea of making additional contributions to your super fund hasn't crossed your mind yet, it will be only a matter of time before your friendly banking app will offer to help you ‘top up your super’.
The problem is, there are limits to how much you can contribute to your super and significant penalties if you get it wrong and breach the limits.
Read in this article
- Just because you can doesn’t automatically mean you should
- Employees can now claim tax deductions for their personal contributions to super
- Warning - Once it’s in your super fund, it won't be coming out for a long time
- There are limits on what you can claim
- There are limits to the amount you can contribute
- There are penalties if you go over the contribution caps set by the government
- What to do if you want to claim a deduction for a personal contribution to your super?
- Frequently Asked Questions: Mortgage vs. Superannuation
Just because you can doesn’t automatically mean you should
If you still have a home mortgage or credit card debt to reduce, perhaps you haven't got your Emergency Fund in place yet, it's important to consider your overall position first.
The government's MoneySmart website suggests - ‘Get the essentials in order. Before you put your extra money into super or your mortgage, seriously consider paying off your other debts and building an emergency fund first'.
Employees can now claim tax deductions for their personal contributions to super
This financial year (17-18) is the first time employees can claim a tax deduction for their personal super contributions, where previously only the self-employed were able to claim such a tax deduction.
Warning - Once it’s in your super fund, it won't be coming out for a long time
While there can be a tax benefit to making a personal tax-deductible contribution to your super, it’s worth remembering you’re then generally not able to access the money you put into your super until your retirement.
There are limits on what you can claim
You can’t claim a tax deduction for:
- super you transfer from one fund to another (including an overseas super fund)
- contributions you split with your spouse, or
- super contributions you transfer to start a retirement income account.
There are limits to the amount you can contribute
The Government limits the amount you can contribute to super. If you exceed the limits you may pay extra tax. Concessional contributions are capped at $25,000 per financial year. This means the total of your employer and salary sacrificed contributions must not be more than $25,000 each year.
There are penalties if you go over the contribution caps set by the government
https://youtu.be/fMyCu9vFEn8
What to do if you want to claim a deduction for a personal contribution to your super?
In order to claim a personal deduction, you'll have to get organised and follow these steps in the right sequence. We recommend you give yourself plenty of time to get it sorted and don’t leave this decision to the last week in the financial year to arrange.
In the following order, you’ll need to:
- Make a personal contribution to your super. The amount you choose to contribute is up to you, however, you need to bear in mind your contribution caps (for more on this, see below).
- Lodge a notice of intent to claim or vary a deduction for personal super contributions form with your super fund, which your super fund will acknowledge, in writing.
- Following the end of the financial year prepare and lodge your tax return using the written acknowledgement from your super fund, which will confirm both your intention to claim a tax deduction and the amount you can claim.
Frequently Asked Questions: Mortgage vs. Superannuation
Should I prioritize debt or retirement savings in 2026?
This decision hinges on the "Interest Rate vs. Investment Return" gap. Paying down a mortgage with a 6% interest rate is equivalent to finding an investment that returns 6% tax-free. Conversely, super contributions only cost you 15% tax on the way in, potentially providing an immediate tax saving of 15% to 32% depending on your income bracket. The "Sovereign" path often involves securing your Emergency Fund first before splitting excess cash flow between an offset account and super.
How much can I contribute to super before-tax in 2026?
For the 2025-26 financial year, the Concessional Contribution Cap is $30,000. This is a hard limit that includes your employer’s 12% SG contributions. If you earn $150,000, your employer is already contributing $18,000, leaving you with a personal contribution "headroom" of $12,000. Be aware that the cap is indexed and is forecast to rise to $32,500 from 1 July 2026.
What is the 'Liquidity Trap' of superannuation?
The primary risk of the superannuation strategy is preservation. Once you contribute money to super, it is "locked" until you reach your preservation age (currently 60 for most). Unlike a mortgage offset account, where you can redraw funds for a roof repair or medical emergency, superannuation is effectively a "one-way street" for your cash until retirement. Never contribute funds that you might need for short-term debt security.
Does salary sacrifice still beat personal deductible contributions?
They are now tax-equivalent. Since 2017, employees can make Personal Deductible Contributions and get the same tax result as salary sacrifice. This provides significant flexibility: you can keep your money in a mortgage offset account all year—saving you interest every day—and then make a single "Notice of Intent" contribution in June to capture the tax benefit without losing access to your cash during the year.
Disclaimer: The choice between super and mortgage depends on individual tax brackets and risk tolerance. For a "Black and White" comparison of your specific numbers, we recommend a confidential consultation.
Call us today on 1300 137 403 or email us here for a no-obligation private chat about your situation.
Drew 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.
