Superannuation

What Is Superannuation?

Superannuation (commonly called “super”) is Australia’s mandatory employer-funded retirement savings system. Since 1992, Australian employers have been required to contribute a percentage of eligible employees’ ordinary time earnings into a complying superannuation fund, which the employee cannot access until they reach preservation age (currently 60 for most workers).

Super is one of the most distinctive features of Australia’s tax and financial system, and Australia’s collective super pool of approximately A$3.9 trillion (2026) is among the largest pension pools per capita in the world.

Superannuation Guarantee Rate

The Superannuation Guarantee (SG) rate — the minimum percentage employers must contribute — has risen steadily:

Period	SG Rate
2021-22	10%
2022-23	10.5%
2023-24	11%
2024-25	11.5%
2025-26 and 2026-27	11.5%
2025-26 onward (legislated)	12% (from 1 July 2025)

For 2026-27: employers must contribute 11.5% of ordinary time earnings (OTE) to your super fund, on top of your salary. (Check current legislation — the legislated rise to 12% from July 2025 may be reflected in 2026-27.)

Important: Super is paid in addition to your gross salary, not deducted from it. A $100,000 salary comes with $11,500 in super contributions on top.

How Super Is Taxed

Contributions

Super contributions are taxed inside the fund (not at your personal income tax rate):

Concessional (pre-tax) contributions — taxed at 15%:

• Employer SG contributions
• Salary sacrifice contributions (arranged by the employee)
• Personal deductible contributions (self-employed)
• Annual cap: $30,000 for 2026-27

This 15% tax rate is significantly lower than most employees’ marginal income tax rates — the key tax advantage of super. A worker in the 37% or 45% bracket who salary-sacrifices into super instead of taking cash pays 15% tax on those dollars rather than 37–45%.

Low Income Super Tax Offset (LISTO): Workers with incomes below $37,000 receive a tax offset of 15% of concessional contributions (up to $500) into their super fund, ensuring they do not pay more tax on super contributions than they would on equivalent take-home pay.

Division 293 Tax: High earners (taxable income + concessional contributions > $250,000) pay an additional 15% tax on concessional contributions — bringing their rate to 30% inside super.

Non-concessional (after-tax) contributions — taxed at 0%: Money you contribute from after-tax income. No further tax inside the fund. Annual cap: $120,000 for 2026-27 (or $360,000 over 3 years under the bring-forward rule, subject to total super balance limits).

Earnings Inside Super

Investment earnings inside a super fund during the accumulation phase are taxed at 15% (with a one-third discount on capital gains from assets held more than 12 months, giving an effective CGT rate of 10%).

During the pension (retirement) phase, earnings on assets supporting a retirement income stream are taxed at 0% — completely tax-free.

Withdrawals

• Before 60: Taxed — complex rules apply based on preserved amounts, taxable and tax-free components
• After 60: Generally tax-free (for most components)
• Death benefit: Paid to dependants — usually tax-free; to non-dependants — taxable component taxed at up to 15%

Types of Super Funds

Industry funds: Not-for-profit funds run by unions and employer associations. Generally lower fees. Examples: Australian Super, HESTA, REST.

Retail funds: For-profit funds run by banks and insurers. Often higher fees with more personalised services.

Self-Managed Super Funds (SMSFs): You control the investment strategy. Allowed for 2–6 members. Popular for sophisticated investors or those wanting to hold specific assets (e.g., commercial property, direct shares). High compliance obligations and setup costs.

Corporate funds: Employer-specific funds for large companies’ employees.

Salary Sacrifice: Boosting Super Tax-Efficiently

Salary sacrifice involves agreeing with your employer to forgo a portion of your pre-tax salary, which is then paid directly into your super fund as a concessional contribution. This is taxed at 15% inside super instead of your marginal rate.

Example: Employee earning $120,000 (marginal rate 37%):

• Salary sacrifices $10,000 into super
• Tax on $10,000 inside super: $1,500 (15%)
• Tax if taken as salary: $3,700 (37%)
• Net saving: $2,200 per year on $10,000 sacrificed

Salary sacrifice up to the $30,000 concessional cap. Many employees also count their employer’s SG contribution toward this cap.

Accessing Super: Preservation Age

You generally cannot access your super until you reach preservation age:

Date of birth	Preservation age
Before 1 July 1960	55
1 July 1960 – 30 June 1961	56
…	…
From 1 July 1964	60

After reaching preservation age and meeting a condition of release (typically retirement or reaching age 65), you can withdraw super as a lump sum or start an income stream.

From age 65, you can access super regardless of employment status.

Super and the Tax-Free Threshold

Because employer super contributions are paid on top of salary, they do not appear in your taxable income and do not affect your income tax calculations. This is why the Tax Atlas Australia calculator shows take-home pay based on salary alone — super is a separate, ring-fenced system.

Key Takeaway

Superannuation is Australia’s compulsory retirement savings system — 11.5% of your ordinary earnings contributed by your employer, taxed at a concessional 15% inside the fund and typically accessible tax-free after age 60. For most Australians, it represents their largest financial asset after their home. Salary sacrifice into super is often the single most tax-effective strategy available to reduce current-year tax while building retirement wealth. Use the Australia income tax calculator for your income tax and take-home pay calculations.