Your Mortgage or your Super - which one should get your money first?

Paying down your debt or topping up your super? Either way it can still feel like a gamble Paying down your debt or topping up your super? Either way it can still feel like a gamble

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.

Jump Ahead

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

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:

  1. 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).
  2. 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.
  3. 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.
Speak to us to determine whether claiming a tax deduction on personal super contributions is the best strategy for your personal circumstances
Drew Browne

Drew specialises in helping people protect and provide for what matters most in their lives. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His company Sapience Financial is committed to using business solutions for good in the community, and in 2015 certified as a B Corp. In 2017 Drew was recognised in the inaugural Australian Businesses of Tomorrow National Awards. Drew writes for successful Small Business Owners and Entrepreneurs, his blogs can be read on and 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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Drew Browne

Sapience Founder & Director.
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