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Working out how best to grow your super nest egg can be confusing and selecting the right mix of concessional and non-concessional contributions makes things even tougher.
To help get you thinking about which mix of contributions could work best for you, SuperGuide has created some case studies for typical Aussies of different ages, income levels and work situations in 2020/21.
The case studies show how using different super contributions can make a significant difference to your take-home pay, super balance – and possibly your tax bill.
How do I work out my best mix of super contributions?
Fortunately, there are some nifty tools around to help point you in the right direction when it comes to making super contributions.
One of the best is available on the Australian Securities and Investment Commission (ASIC) website – and best of all, it’s free. (And it’s the tool we used to work out our case studies.)
Important
The results provided by this type of calculator don’t take into account your particular financial circumstances and debts, or your lifestyle expenses and objectives.
As these factors can vary significantly between individuals, you need to consider these before deciding on the best mix of super contributions and amounts to make.
To use ASIC’s Super Contributions Optimiser, simply enter the necessary information about your age, income and super contributions. The calculator assumes your employer contributes an amount equal to 9.5% of your ordinary times earnings (OTE) into your super account, but if your employer contributes more than the required SG minimum, simply increase the percentage amount.
The calculator is regularly updated to reflect the annual taxation rates applying to your salary for the current financial year.
If you are self-employed, reduce your amount of employer contributions to 0% and enter your contributions amounts as additional voluntary or personal contributions.
The purpose of the ASIC calculator is to show the combination of super contributions giving you the biggest increase in your super for a given reduction in your take-home pay in the current financial year.
Need to know
The ASIC calculator does not give you the option to make bring-forward non-concessional contributions from either of the following two financial years (if you are eligible), nor does it allow you to enter information if you have used the bring-forward rule in either of the previous two financial years.
For more information about the bring-forward rule, see SuperGuide article A super guide to understanding the bring-forward rule.
Unfortunately, the contribution calculator does not work for members of defined benefit super funds, as these super funds use fund-specific formulas to work out the super benefits for their member.
Super tip
Your results from ASIC’s Super Contributions Optimiser calculator are only applicable for the current financial year, as the super contributions and taxation rules change regularly.
If you are planning your contributions mix for the next few years, it’s important to recheck the calculator on a regular basis – such as yearly – as your best mix of contributions may change over time.
What types of super contributions can I make?
Before checking out the ASIC calculator, here’s a quick overview of the main types of super contributions, plus some links to SuperGuide articles explaining things in more detail if you want to refresh your memory:
1. Concessional (before-tax) contributions
These contributions are made from your income before you pay income tax.
There is a 15% contributions tax payable on these contributions when they are added to your super account and the total amount of your concessional contributions must not exceed the annual cap or limit ($25,000 in 2020/21).
The main types of concessional contributions are:
- Your employer’s Super Guarantee (SG) contributions
- Award and additional employer contributions
- Salary-sacrifice contributions
- Personal contributions for which you claim a tax deduction.
For more information, read SuperGuide articles:
- Your simple guide to Superannuation Guarantee (SG) contributions
- Salary sacrifice and super: How does it work?
- How do tax-deductible superannuation contributions work?
2. Non-concessional (after-tax) contributions
These super contributions are made from your income after you pay income tax.
There is no 15% contributions tax payable on these contributions as you have already paid tax on the money. Your total contributions must not exceed the annual cap ($100,000 in 2020/21).
The main types of non-concessional contributions are:
- Personal contributions from your tax-home pay
- Spouse contributions
For more information, read SuperGuide articles:
- 2020/21 guide to non-concessional contributions (after-tax super contributions)
- Contributions splitting: How to boost your spouse’s super
3. Government contributions into your super account
These contributions are made by the government directly into your super account if you meet the eligibility criteria and they can provide a useful boost to your super account (see following case studies):
- Co-contributions
- Low income super tax offset (LISTO)
For more information, read SuperGuide articles:
- How a government co-contribution can help boost your super savings
- LISTO (Low Income Superannuation Tax Offset): Refund of super tax for low income earners
SuperGuide case studies: How to mix and match your super contributions
The following case studies show how using a variety of super contributions can substantially boost the amount in your super account.
Obviously, using a different mix of contributions or a higher/lower contribution amount from your salary will give different results. In many cases, making certain types of super contributions (such as using a salary-sacrifice arrangement) can also lower your annual tax bill.
Important
These case studies are presented as general information only and are solely intended to give you ideas on aspects you may need to consider when making additional superannuation contributions. They do not take into account all aspects of someone’s financial or other situation, and should not be construed as general or personal advice.
Case study 1: Starting out in the workforce
Min is a first-year apprentice electrician living at home with his parents. Under the award, his pay and allowances give him an annual salary of $26,600 and his employer is making the normal 9.5% SG contributions on his behalf.
Even though he is only 20, Min’s parents are keen for him to start saving towards his retirement. To encourage him to put more into his super, his parents do not make Min pay rent, leaving him with $100 out of his weekly take-home pay of $487 to contribute into his super account.
To get the biggest boost to his super, Min should consider making $109 a week as a before-tax contribution through a salary-sacrifice arrangement with his employer and another $16 a week as a non-concessional (after-tax) contribution.
Pay for Min ($ per annum)
| With super contributions | No super contributions | |
|---|---|---|
| Gross salary | $26,600 | $26,600 |
| Less salary sacrifice | -$5,654 | $0 |
| Less income tax + Medicare levy | -$57 | -$1,276 |
| Take-home pay | $20,946 | $25,324 |
| Less after-tax super contributions | -$822 | $0 |
| Net pay | $20,124 | $25,324 |
Min’s super ($ per annum)
| With super contributions | No super contributions | |
|---|---|---|
| Employer contributions | $2,527 | $2,527 |
| Before-tax contributions (salary sacrifice) | $5,654 | $0 |
| After-tax contributions | $822 | $0 |
| Government co-contribution | $411 | $0 |
| Low income super contribution | $500 | $379 |
| Less contributions tax | -$1,226 | -$379 |
| Net contributions | $8,687 | $2,527 |
Source: Author using ASIC Super Contributions Optimiser calculator
Case study 2: Married with children
Aged 40, Jason is a logistics supervisor in the coal industry, while his 36-year-old wife Leigh-Anne earns $35,000 as an admin assistant at a large childcare centre. Following a recent promotion, Jason’s new salary of $72,000 gives them the opportunity to put a little more into their super accounts.
With two small daughters and a large mortgage to pay off, Jason and Leigh-Anne don’t have a lot of spare cash each week, but they believe they can manage to put $100 a week into their super accounts.
A good option for them to consider when it comes to their super contributions is for Jason to make a $124 salary-sacrifice contribution each week from his before-tax salary and for Leigh-Anne to make a $19 per week non-concessional (after-tax) contribution.
Pay for Jason and Leigh-Anne ($ per annum)
| With super contributions | No super contributions | |||
|---|---|---|---|---|
| Jason | Leigh-Anne | Combined | Combined | |
| Gross salary | $72,000 | $35,000 | $107,000 | $107,000 |
| Less salary sacrifice | -$6,437 | $0 | -$6,437 | $0 |
| Less income tax + Medicare levy | $13,070 | $3,192 | $16,262 | $18,499 |
| Take-home pay | $52,493 | $31,808 | $84,301 | $88,501 |
| Less after-tax contributions | $0 | -$1,000 | -$1,000 | $0 |
| Net pay | $51,493 | $30,808 | $83,301 | $88,501 |
Jason and Leigh-Anne’s super ($ per annum)
| With super contributions | No super contributions | |||
|---|---|---|---|---|
| Jason | Leigh-Anne | Combined | Combined | |
| Employer contributions | $6,840 | $3,325 | $10,165 | $10,165 |
| Before-tax contributions (salary sacrifice) | $6,437 | $0 | $6,437 | $0 |
| After-tax contributions | $0 | $1,000 | $1,000 | $0 |
| Government co-contribution | $0 | $500 | $500 | $0 |
| Low income super contribution | $0 | $499 | $499 | $499 |
| Less contributions tax | -$1,992 | -$499 | -$2,490 | -$1,525 |
| Net contributions | $11,286 | $4,825 | $16,111 | $9,139 |
Source: Author using ASIC Super Contributions Optimiser calculator
Case study 3: High income, low super
Nasir is a 49-year-old app developer who has created several successful IT ventures that provide him with an annual income of $176,000. As he is self-employed through his own company, Nasir has used most of his income in recent years to fund his businesses and so has little saved for his retirement years – although he does own his own home.
To help boost the low balance in his super account, Nasir is keen to make some significant contributions over the next few years – even if it means being very careful with his spending. In 2020/21 he plans to contribute $70,000 from his take-home pay of almost $119,863.
In order to get the biggest boost to his super account, Nasir could consider making $8,280 a year in salary-sacrifice (before-tax) super contributions and $64,949 a year in non-concessional (after-tax) contributions.
Pay for Nasir ($ per annum)
| With super contributions | No super contributions | |
|---|---|---|
| Gross salary | $176,000 | $176,000 |
| Less salary sacrifice | -$8,280 | $0 |
| Less income tax + Medicare levy | -$52,908 | -$56,137 |
| Take-home pay | $114,812 | $119,863 |
| Less after-tax contributions | -$64,949 | $0 |
| Net pay | $49,863 | $119,863 |
Nasir’s super ($ per annum)
| With super contributions | No super contributions | |
|---|---|---|
| Employer contributions | $16,270 | $16,270 |
| Before-tax contributions (salary sacrifice) | $8,280 | $0 |
| After-tax contributions | $64,949 | $0 |
| Government co-contribution | $0 | $0 |
| Low income super contribution | $0 | $0 |
| Less contributions tax | -$3,750 | -$2,508 |
| Net contributions | $86,199 | $14,212 |
Source: Author using ASIC Super Contributions Optimiser calculator
Case study 4: Nearing retirement
Robert is aged 60 and is in his final few years of employment as a mid-level manager with a large corporation on an annual salary of $65,000. His wife Carlene is aged 58 and works part time as a dental assistant earning $25,000 a year. Their employers are making the normal SG contribution of 9.5% into their super accounts.
As they have paid off their mortgage and their two children have left home, Robert and Carlene feel they could spare around $3,000 from their combined monthly take-home pay of $6,360 to add to their super accounts.
To get the biggest boost to their super, Robert should consider making $1,569 a month in salary-sacrifice contributions and $1,442 per month as a non-concessional (after-tax) contribution. Carlene could then make a $567 per month salary-sacrifice contribution and a $83 per month non-concessional contribution.
Pay for Robert and Carlene ($ per annum)
| With super contributions | No super contributions | |||
|---|---|---|---|---|
| Robert | Carlene | Combined | Combined | |
| Gross salary | $65,000 | $25,000 | $90,000 | $90,000 |
| Less salary sacrifice | -$18,825 | -$6,800 | $25,625 | $0 |
| Less income tax + Medicare levy | -$6,227 | $0 | $6,227 | $13,679 |
| Take-home pay | $39,948 | $18,200 | $57,148 | $76,321 |
| Less after-tax contributions | -$16,827 | -$1,000 | -$17,827 | $0 |
| Net pay | $23,121 | $17,200 | $40,321 | $76,321 |
Robert and Carlene’s super ($ per annum)
| With super contributions | No super contributions | |||
|---|---|---|---|---|
| Robert | Carlene | Combined | Combined | |
| Employer contributions | $6,175 | $2,375 | $8,550 | $8,550 |
| Before-tax (salary sacrifice) contributions | $18,825 | $6,800 | $25,625 | $0 |
| After-tax contributions | $16,827 | $1,000 | $17,827 | $0 |
| Government co-contribution | $0 | $500 | $500 | $0 |
| Low income super contribution | $0 | $500 | $500 | $356 |
| Less contributions tax | -$3,750 | -$1,376 | -$5,126 | -$1,283 |
| Net contributions | $38,077 | $9,799 | $47,876 | $7,624 |
Source: Author using ASIC Super Contributions Optimiser calculator
Case study 5: Over 60
Arjun is a 68-year-old solicitor working four days a week in a local practice, while his 64-year-old wife Prisha works two days each week as a receptionist at a fitness centre. Arjun earns an annual salary of $78,000 while Prisha earns $250 a week.
They are both keen to grow their super account a little more before they finish working and believe they can afford to contribute $38,000 a year into their super accounts from their combined annual take-home pay of $73,623.
For their best mix of super contributions, Arjun should consider salary sacrificing $17,590 a year into his account, together with making a $25,572 non-concessional (after-tax) contribution.
Given Prisha’s low income, her best super contribution would be to make a $1,000 non-concessional (after-tax) contribution.
Pay for Arjun and Prisha ($ per annum)
| With super contributions | No super contributions | |||
|---|---|---|---|---|
| Arjun | Prisha | Combined | Combined | |
| Gross salary | $78,000 | $13,000 | $91,000 | $91,000 |
| Less salary sacrifice | -$17,590 | $0 | -$17,590 | $0 |
| Less income tax + Medicare levy | -$11,215 | $0 | -$11,215 | $17,377 |
| Take-home pay | $49,195 | $13,000 | $62,195 | $73,623 |
| Less after-tax contributions | -$25,572 | -$1,000 | -$26,572 | $0 |
| Net pay | $22,623 | $12,000 | $35,623 | $73,623 |
Arjun and Prisha’s super ($ per annum)
| With super contributions | No super contributions | |||
|---|---|---|---|---|
| Arjun | Prisha | Combined | Combined | |
| Employer contributions | $7,410 | $1,235 | $8,645 | $8,645 |
| Before-tax contributions (salary sacrifice) | $17,590 | $0 | $17,590 | $0 |
| After-tax contributions | $25,572 | $1,000 | $26,572 | $0 |
| Government co-contribution | $0 | $500 | $500 | $0 |
| Low income super contribution | $0 | $185 | $185 | $185 |
| Less contributions tax | -$3,750 | -$185 | -$3,935 | -$1,297 |
| Net contributions | $46,822 | $2,735 | $49,557 | $7,534 |
Source: Author using ASIC Super Contributions Optimiser calculator
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