What are pre-tax contributions
Pre-tax contributions (also known as before-tax or concessional contributions) are super contributions you or your employer make from your pre-tax income. Doing this can help grow your super balance and could help reduce your taxable income, and the total taxes you pay.
This type of contribution is generally taxed at 15% depending on how much you earn2, which can make it a tax-friendly option for middle-to-higher income earners and potentially lower their income tax. Pre-tax contributions may not be as tax effective for low-income earners.
Types of pre-tax contributions include salary sacrifice, Superannuation Guarantee contributions (12%) from your employer, additional employer contributions and any personal contributions that you claim a tax deduction for.
Why make pre-tax contributions
Pre-tax contributions not only help grow your super but can also potentially reduce your payable income tax.
You can potentially earn returns on your total balance, so making extra contributions now could make a big difference to your super balance at retirement.
Types of concessional contributions
You can make three types of pre-tax super contributions. These include:
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Super from your employer
Most of your super comes from the compulsory contributions made by your employer on your behalf.
These contributions can be:- The minimum legislated rate – this is known as the Superannuation Guarantee (SG), currently set at 12%.
- Industrial award or agreement rate – this rate is determined by the specific industrial awards or agreements that apply to your employment.
- Higher employer rate – some employers choose to contribute a higher percentage to your super.
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Salary sacrifice
Salary sacrifice contributions are voluntary before-tax amounts you can choose to contribute to your super, on top of the Super Guarantee.
Since super contributions are generally taxed at 15% (depending how much you earn), this can lead to a tax saving.
Log into your account online to monitor contributions made to your AustralianSuper account.
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Personal contributions you’ve claimed a tax deduction on
You can also contribute to your super using funds from your salary, savings or proceeds from asset sales.
Claiming a tax deduction for these contributions can help reduce your taxable income, but it’s important to know that when you claim a tax deduction on an after-tax contribution, it becomes a before-tax contribution.
For more information, visit Claiming a tax deduction or go to the ATO website.
Understanding super contributions caps
Caps apply to both concessional and non-concessional contributions. Exceeding your cap could mean additional tax on your super contributions.
If you have more than one super fund, all concessional contributions made to all of your super funds are added together and counted towards your concessional contributions cap.
Log into your AustralianSuper account online to check your AustralianSuper contributions against your cap.
You can keep track of all your concessional contributions across all your super accounts by logging into your myGov account.
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Concessional contributions cap
- You can generally contribute up to $30,000 each financial year (as of 2024/25).
- These contributions are taxed at 15%.
- If you earn over $250,000 in a financial year, an additional 15% tax may apply, potentially increasing your total tax rate on some or all contributions to 30% (known as Division 293 tax).
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Exceeding the concessional contributions cap
- If you contribute more than $30,000 in a financial year, you’ll be taxed at your marginal rate, minus a 15% discount. Additional interest charges may apply. To find your rate, visit the ATO.
- At the end of the financial year, the ATO provides options for you to:
- withdraw up to 85% of your excess contributions for that financial year from your super fund.
- leave your excess contributions in your super account, which will then count towards your after-tax contributions cap.
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Carrying forward unused cap amount
- You may be eligible to carry forward any unused portions of your before-tax contribution cap from previous financial years, over a rolling period of the previous 5 financial years.
- To qualify, you’ll need:
- a super balance of less than $500,000 across all of your super accounts (if not consolidated) as of 30 June of the previous financial year.
- contributions that were below the before-tax contributions cap for up to 5 previous years (not applicable before the 2018/19 financial year).
- To keep track of your concessional contributions, you can:
- log into your AustralianSuper account online, or
- log into your myGov to view all your contributions across all your super account.
Considerations for pre-tax contributions
Evaluate your finances
Retirement access
Government assistance impact
It’s also important to note that:
- The government limits the concessional contributions you can make to super.
- If you go over the limits, you may pay extra tax.
- If your tax file number isn’t held by your super fund, you’ll pay 47% tax.
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Important information to consider
- Salary sacrifice may affect some Government benefits and employee benefits. We recommend you consider seeking financial advice before deciding if a salary sacrifice arrangement is right for you.
- If your adjusted taxable income (including your before-tax contributions) is more than $250,000 in a financial year, your before-tax contributions will be taxed at 30%, to that extent. This extra 15% tax is referred to as Division 293 tax. Find out more at ato.gov.au/tax-rates-and-codes/key-superannuation-rates-and-thresholds