How to save tax and grow your super

Superannuation provides some valuable opportunities to reduce tax and make your hard-earned dollars go much further in retirement.

No matter what stage of life you are at, when you invest through super you might be eligible for concessions that minimise the tax you are required to pay.

Super provides two main tax incentives:

  • Income earned on the fund (investment earnings) is taxed at a maximum of 15 percent
  • Pre-tax contributions are taxed at either 15 percent or 30 percent (depending on your income), which may be much lower than your marginal tax rate.

So by investing through the super structure, you may be taxed more favourably than if you were to invest outside of super, helping you to build your wealth. Let’s look at some strategies you might want to take. Keep in mind that tax laws around super are complex and they affect everyone differently, so consider getting professional advice before taking action.

Know your limits

Before investing through the super structure make sure you understand the annual limits set by the government, or you may have to pay extra tax.

There are two caps that affect how much you can contribute to super each year – a concessional (before tax) contributions cap and a non-concessional (after tax) contributions cap.

Concessional contributions include your employer's compulsory Superannuation Guarantee contributions, your salary sacrificed contributions and any contributions claimed as a tax deduction.

Under the superannuation rules, the concessional cap is indexed in line with movements in average weekly ordinary time earnings (AWOTE), and moves in $5,000 increments. The new indexed amount becomes available each February.

If you're under 49, contributions made to super with pre-tax money (including salary sacrifice and compulsory employer contributions) are limited to $30,000 for the 2015/16 financial year. However, if you're 49 or over, this limit is increased to $35,000 this financial year.

Non-concessional contributions are made with after-tax money (including ad hoc personal contributions) and are limited to $500,000. This new lifetime cap replaces the old annual cap of $180,000.

Salary sacrifice

Making a concessional or before-tax contribution to your super is also known as salary sacrifice. This is an arrangement with your employer to give up or sacrifice part of your before-tax salary and deposit it directly to your super account.

The beauty of salary sacrificing is that even a small sum added to your super now can make a significant difference over time.

Adding to your super from your before-tax salary means your contributions will be taxed at the rate of 15 percent if you earn under $250,000 per annum (or 30 percent if you earn over $250,000 per annum)1. This may be a lot lower than your marginal income tax rate, which could be as high as 45 percent.

Other remuneration, including annual bonuses or leave payments, can also be salary sacrificed as long as the salary sacrifice arrangement is entered into prior to the conditions being met.

After-tax contributions

Making these extra voluntary contributions to your super from your after-tax money could make a world of difference by the time you retire.

You can make non-concessional contributions as often as you like and your contribution won't be taxed at the time of contribution, because you've already paid tax on money you've earned.

You won’t be able to access your money until you retire, unless you meet a condition of release.


If you are self-employed or work as a contractor, you probably need to think about super more than anyone else. If you don't act now, you might not have enough money to live on when you retire.

If you are self-employed, you may be eligible to claim tax deductions on your superannuation contributions, as long as no more than 10 percent of your income comes from one employer.

Any contributions you claim as a tax deduction fall into the category of concessional contributions and will be subject to contributions tax of 15 percent (30 percent if you earn over $300,000 per annum).

Some self-employed people may also be eligible to receive bonus co-contributions from the Government.

Spouse contributions

Contributing to your spouse's super is a great way to help boost their retirement savings. If you are a taxpayer you could be eligible for a tax offset if you contribute to your spouse's super.

If your spouse's total income is under $10,800 per annum, you will receive an 18 percent tax offset on the first $3,000 you contribute on their behalf, up to a maximum of $540 per annum. The offset operates on a sliding scale based on your spouse’s income if it is more than $10,800 – and it phases out to zero once their income exceeds $13,800 per annum.

To take advantage of this strategy, your spouse will need to be under 65 or have satisfied a work test if he or she is between 65 and 69.

Before investing through the super structure make sure you understand the annual limits set by the government, or you may have to pay extra tax.

Contribution splitting

You might be able to split up to 85 percent of your pre-tax super contribution with your spouse.

This can be useful because you may be able to balance out the level of super each partner holds and make better use of the available tax incentives.

Contributions can be split after the end of each final year. You can split your contributions with a spouse who is under 55, regardless of whether they are working or not, or between 55 and 65 and not permanently retired.

Capital gains

If you've sold an asset, including property or shares, some significant capital gains tax (CGT) concessions may be available to help you achieve the best after-tax sale result.

By investing the sale proceeds in super you might be able to claim a portion of the contribution as a tax deduction. To be eligible for the CGT concessions, you must be able to satisfy specific requirements.

Transition to retirement

If you are aged 55 to 65 you can access part of your super through a transition to retirement pension.

The income you receive through this type of pension is favourably taxed and can supplement your salary if you're still working.

You can also continue to contribute to super when accessing this type of pension.

One of the most tax-effective strategies for people aged between 55 and 65, who are still working and on higher tax rates, is to salary sacrifice into super while accessing a part pension.

This strategy can help reduce your taxable income, while at the same time providing you with a tax-effective income stream.

Depending on your circumstances, you might benefit from one or more of these strategies for investing through super. They can help you maximise your entitlements, reduce your tax payments and grow your retirement nest egg.

Just remember that super can be complex and the legislative requirements are constantly changing. It's important to seek expert financial advice before adopting an investment strategy.

Important Information:


Important Information:

Any advice is general advice only. It was prepared without taking into account your objectives, financial situation, or needs. You should consider if this advice is appropriate for your situation. We recommend you read the Product Disclosure Statement (PDS) or Terms and Conditions, available online or via a Citibank branch, in addition to seeking independent legal, financial and taxation advice on your personal circumstances before acting on the information contained in this material.

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