Before-tax contributions

You can boost your super by making before-tax contributions to your account or asking your employer to redirect some of your before-tax salary into your super. The main benefits, include paying less tax and growing your retirement nest egg faster.

Before-tax contributions (also known as concessional contributions) are contributions made with your pre-tax income. They are taxed at a concessional rate, which is generally lower than your marginal tax rate.

Making additional before-tax contributions is a great way to boost your super, while paying less tax, so you can retire with more.

There are limits set by the Australian Government on how much you can contribute to your super. The before-tax (concessional) contribution cap is $27,500 per year. If the combined total of your employer and salary sacrificed contributions exceeds this cap, you could end up paying extra tax.

How to make before-tax contributions

Employer contributions

Most before-tax contributions are made by your employer on your behalf. These may be paid at:

  • the minimum legislated rate, known as the Superannuation Guarantee (SG)
  • the minimum rate set by an industrial award or agreement
  • a higher rate set by your employer.

Super stapling

From 1 November 2021, your existing active super account will be ‘stapled’ to you and follow you when you move from job to job. When you start a new job, your employer may need to request your stapled super fund details from the ATO. Your employer will still offer you a choice of super fund.

A stapled super fund is an existing active super account which is linked, or ‘stapled’, to you as an individual employee so that it follows you as you change jobs. This is different to the previous system where you were automatically placed in your new employer’s default fund if you didn't make an active choice.

Head to the Super stapling explained page for more information, or give us a call.

Salary sacrifice

You can also set up additional before-tax contributions that are deducted from your pay, known as salary sacrifice.

You will need to set up a salary sacrifice agreement with your employer. Make sure you clarify the terms to ensure your employer SG contributions are calculated on your full pre-tax income and that salary sacrifice will not impact entitlements like long-service leave.

Important salary sacrifice considerations

Before you set up a salary sacrifice, consider the following:

  • Salary sacrifice contributions are included in income tests used to determine eligibility for a range of government financial assistance programs including the government co-contribution, spouse contribution rebate, and self-employed deduction.
  • Your employer contributions and salary sacrifice contributions count toward your concessional contributions cap. Any concessional contributions over the cap are taxed at your marginal rate. If your concessional contributions are close to the cap you should review your level of salary sacrifice contributions during the financial year.
  • If you are paid weekly or fortnightly, some tax years will have an additional pay period which could result in your contributions exceeding the cap in that year (the cap for salary sacrifice is effectively reduced by your employer superannuation guarantee contribution).
  • From 1 January 2020, your employer can not treat salary sacrifice contributions as satisfying their SG obligation or use them to reduce the ordinary time earnings calculation your super entitlement is based on. This means your employer must contribute the minimum SG contribution, as well as your agreed salary sacrifice amount to your super account.
  • Employers often pay your salary sacrifice contribution in the month after it was deducted from your salary. This could result in a contribution being made in July for salary deducted in June. In this case the contribution will be included in the cap for the new financial year.
  • If you are making salary sacrifice contributions as part of a transition to retirement strategy, you may need to review your salary sacrifice contribution amount and your pension payment against any adjustment to the caps.

If your employer doesn't offer salary sacrifice, you can make additional contributions from your take-home pay. If you claim these after-tax contributions as a tax deduction, they can also be converted into concessional contributions.

Catch-up contributions

If your total superannuation balance is below $500,000 (on 30 June of the previous financial year) you may be able to take advantage of the 'carry forward' rule.

So how does it work?

Each financial year you can make before-tax (concessional) contributions up to your cap, which is currently $27,500. If you don't make before-tax contributions to your cap, you can carry forward this unused amount on a rolling basis for five years.

Effectively you're 'catching up' on the full amount you could have contributed in previous years.

The first year you will be entitled to carry forward unused amounts is the 2019-20 financial year. Unused amounts expire after five years.

Usually, any additional contributions above your cap are taxed at a higher rate, but catch-up contributions will be taxed at the concessional 15% in your super account.

For more information on the carry forward rule, please visit the ATO website.

Low Income Super Tax Offset

The Low Income Super Tax Offset (LISTO) is a government payment that is designed to offset the 15% tax low income earners have paid on their superannuation contributions (including employer contributions).

If you earn $37,000 or less in a financial year and make before-tax contributions to a complying super fund, up to $500 may be paid to your super account.

The ATO will automatically workout your LISTO when you lodge your tax return and make the payment to your super account.

Please ensure you have provided Media Super your Tax File Number or you will not receive the payment.