Super Contribution Strategy by Income Level — Australia

There is no single “best” super contribution strategy that applies to everyone. The tax effectiveness of concessional (pre-tax) vs non-concessional (after-tax) contributions — and the appropriate level of total contributions — varies significantly depending on your income. Here is how the landscape looks across different income levels.

The Two Types of Super Contributions

Low-Income Earners — Under $37,000

Key features at this income level:

• Marginal tax rate: 0–19% (below $18,200: 0%; $18,201–$45,000: 19%)
• Super contributions tax rate: 15%
• Low Income Super Tax Offset (LISTO): Government pays up to $500 directly into your super if you earn under $37,000 and employer contributions are made. Effectively reduces the 15% contributions tax to near zero for many low-income earners.

Strategy considerations:

The LISTO makes employer SG contributions highly efficient — after the LISTO refund, there is little to no tax drag on employer contributions.

Salary sacrifice is less compelling: At 19% marginal rate, the saving on salary sacrifice is only 4% (19% − 15% = 4%). At 0% (below $18,200), salary sacrifice actually adds a tax cost (contributions taxed at 15%; your income would otherwise be untaxed). Salary sacrifice is generally not recommended for those earning under $18,200.

Super co-contribution: For those earning under $58,445 who make after-tax (non-concessional) contributions, the government may add up to $500 as a co-contribution. At $42,016 or below, the maximum $500 co-contribution applies for every $1,000 contributed. See Super Co-Contribution Explained.

Priority: Build emergency savings first; the co-contribution incentive can then make after-tax voluntary contributions worthwhile for those in the $37,000–$58,000 range.

Middle-Income Earners — $45,000 to $135,000

Key features at this income level:

• Marginal tax rate: 32.5% + 2% Medicare levy = 34.5%
• Super contributions tax rate: 15%
• Tax saving per dollar salary sacrificed: ~19.5 cents

This is where salary sacrifice is most clearly beneficial — the gap between marginal rate (34.5%) and super contributions rate (15%) creates a meaningful, reliable annual tax saving.

Strategy considerations:

Prioritise concessional contributions:

• If your employer does not offer salary sacrifice, make personal deductible contributions — contribute from your bank account, then lodge a Notice of Intent to Claim before filing your tax return
• Aim to use the full $30,000 cap if cash flow allows

Track your employer SG: At $90,000, employer SG is $10,350 (at 11.5%). That leaves $19,650 of cap space for salary sacrifice or personal deductible contributions.

Non-concessional contributions are less tax-effective at this stage if you have room under the concessional cap — there is no deduction for NCCs, and the earnings benefit inside super is the same regardless of which type you make. Prioritise filling the concessional cap first.

Catch-up contributions: If your balance is under $500,000 and you have unused cap space from prior years, catch-up contributions can be valuable — e.g. if you took parental leave or had a period of part-time work.

Upper-Middle Income — $135,000 to $250,000

Key features at this income level:

• Marginal tax rate: 37–45% + 2% Medicare levy = 39–47%
• Super contributions tax rate: 15%
• Tax saving per dollar salary sacrificed: ~24–32 cents

The tax benefit of concessional contributions is at its highest in this bracket (before Division 293 cuts in above $250,000). The gap between marginal rate and super contributions tax rate is 24–32 percentage points.

Strategy considerations:

Maximise concessional contributions to the $30,000 cap. This is the clearest tax strategy at this income level.

Spouse contributions: If your partner earns under $40,000, the spouse contribution tax offset (up to $540) is a straightforward extra step.

Consider catch-up contributions if your balance is under $500,000 and you have prior year unused cap space — the tax saving at 39%+ marginal rates is very significant.

Non-concessional contributions: Once the concessional cap is maximised, NCCs into super still benefit from the 15% earnings rate (vs 39%+ on returns outside super). For those with large savings outside super, NCC up to the $120,000 annual cap (or the bring-forward amount of $360,000) may be worthwhile.

Division 293 tax does not apply until combined income and concessional contributions exceed $250,000 — those approaching this threshold should calculate carefully to avoid it unnecessarily (though it’s still usually beneficial to contribute once you’re in it — see below).

High Earners — Over $250,000

Key features at this income level:

• Marginal tax rate: 45% + 2% Medicare levy = 47%
• Super contributions tax rate: 30% (15% base + 15% Division 293 tax)
• Tax saving per dollar salary sacrificed: ~17 cents (47% − 30% = 17%)

Division 293 tax is an additional 15% tax on concessional super contributions for those whose combined income (including taxable income, reportable fringe benefits, and total net investment losses) plus concessional contributions exceeds $250,000. It brings the effective tax rate on super contributions to 30%.

Strategy considerations:

Concessional contributions are still tax-effective at 47% marginal rate: Even at 30% super tax, the saving is 17 cents per dollar vs taking the income at 47%. Salary sacrifice to the $30,000 cap generally remains worthwhile.

Non-concessional contributions: Inside super, earnings are taxed at 15% — vs 47% outside super on non-discounted income. For capital gains on assets held >12 months outside super, the effective rate is ~23.5% (47% × 50% discount) — still higher than the 15% earnings rate inside super. The after-tax NCC strategy is worth considering for high earners with large external savings.

Transfer Balance Cap awareness: At very high super balances, approaching the $2.0M Transfer Balance Cap becomes a planning consideration. Once the cap is met, the tax-free pension phase is limited.

Consider advice: At income levels above $250,000, the interaction of Division 293, NCCs, bring-forward rules, concessional caps, and the transfer balance cap is complex enough that professional financial advice is often worth the cost.

Quick Reference by Income Level

Frequently Asked Questions

I’m on $60,000 and my employer contributes 11.5%. How much more can I salary sacrifice? Your employer SG is $6,900 per year. The concessional cap is $30,000 — leaving $23,100 of cap space for salary sacrifice or personal deductible contributions.

What if I go over the $30,000 concessional cap by mistake? Excess concessional contributions are added to your assessable income for the year and taxed at your marginal rate (with a 15% tax offset to account for contributions tax already paid within the fund). You can elect to release up to 85% of the excess from super to pay the resulting tax bill. This is manageable but administratively inconvenient — set up a tracking system to avoid overshooting.

I’m 50 and have a low super balance — which strategy makes the most sense to catch up? At 50+, with 10 years to preservation age, the priority is generally: (1) maximise concessional contributions to $30,000/year, (2) use catch-up contributions if under $500k balance and prior-year space is available, and (3) if significant after-tax savings exist, use NCC bring-forward rules. The right answer depends on your income, balance, and other assets — professional advice is worthwhile for a tailored plan.

See also: Super Strategies. For advice tailored to your situation, speak with a licensed financial adviser. You can find one through the ASIC financial advisers register or MoneySmart.