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Sorting your super: before tax vs after tax contributions

For most people, the regular contributions into super made by their employer may not be enough to comfortably retire on. That’s a sobering thought. Which is why it’s important to make your super work for you. The good news is that there are ways to boost your super and retire with more. In this article we briefly look the different kinds of contributions you can make into your super—before tax or after tax—and how each can impact your super in different ways.

Before tax (concessional) contributions

Concessional contributions are when your employer pays 9.5% of your salary directly into your super fund as required by law. The concession is a tax deduction for your employer because the contribution is made before tax.

If you pay money into super yourself (e.g. you have a self-managed super fund) and claim it as a tax deduction, that becomes a concessional contribution as well. There’s a 15% tax on concessional contributions. So for a $1,000 contribution, for example, you’ll have $850 in your fund after tax.

Concessional contributions can be through salary sacrifice which is where you allocate some of your before-tax pay to your super account. Or it can be from a personal deductible contribution which is an alternative to salary sacrifice, where you can claim a tax deduction in your tax return when making a contribution to your own super.

After tax (non-concessional) contributions

Personal after-tax contributions are non-concessional as they do not draw a tax deduction. The upside is that you can contribute up to $100,000 into your super account as long as your total super balance was less than $1.6 million on 30 June 2018.

Another form of after-tax contribution is a spouse contribution. This is where you make a contribution into your spouse’s account or where your spouse makes a contribution into your account. Paying a contribution from your after-tax pay or savings without claiming a tax deduction is called a non-concessional contribution.

You do not pay a contributions tax in this instance. Using the same example as above, paying $1,000 into super, you’ll have the full $1,000 working for you—although you probably already paid tax of up to 47% including the Medicare Levy.

Which one is best?

Going strictly by the numbers, making before-tax contributions is a good option. That’s because paying 15% contributions tax is better than paying up to 45% tax on your salary.

That relatively generous tax treatment (15%) has seen the government put limits, called caps, on how much you can pay into super each year. Before-tax contributions are capped at $25,000 while after tax contributions are capped at $100,000, as mentioned. Pay more than the caps limits and you could be slugged with penalties.

In the table below we provide a summary snapshot of before-tax versus after-tax contributions:

  Before tax After tax
Tax deduction on contributions Yes No
15% conributions tax payable Yes No
Annual contributions limit $25,000 $100,000
Tax-free when withdrawn from super Not always Yes
Tax-free when paid to beneficiaries Not always Yes
Qualifies for spouse tax offset No  Yes
Qualifies for Low Income Superannuation Tax Offset  Yes  No


Ready to learn more about contributions and deductions when it comes to your super? There are lots of options for you to explore at VicSuper that can help you do just that:

Learn more about growing your super and our advice services.



Important information
This is general information only and does not take into account your specific objectives, financial situation or needs. We recommend you seek professional advice for your own circumstances. Contact us to make an appointment to see one of our representatives. When members receive advice, they receive it under our financial planning business Aware Financial Services Australia Limited’s own AFS licence. Aware Financial Services Australia Limited ABN 86 003 742 AFSL 238430 is wholly owned by Aware Super Pty Ltd as trustee of the fund. You should read their Financial Services Guide before making a decision. Issued by Aware Super Pty Ltd ABN 11 118 202 672, AFSL 293340, the trustee of the Aware Super ABN 53 226 460 365.
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