What super is
Superannuation is a tax-advantaged long-term investment account whose explicit purpose is funding your retirement. Money inside super pays a concessional tax rate (15% on contributions and earnings during the accumulation phase, 0% in the pension phase up to a transfer balance cap), but you generally can't access it until you reach preservation age and retire — currently 60 for almost everyone working today.
Australian super is mandatory in two senses: employers must pay the Super Guarantee (SG) on top of your wages, and most individuals must keep their accumulated balance in a regulated super fund until preservation age. There are about $3.9 trillion of assets in the Australian super system as of 2025, making it one of the largest pools of retirement savings in the world relative to GDP.
Super Guarantee — now 12.0%
The Super Guarantee is the minimum percentage of your ordinary time earnings that your employer must contribute to your nominated super fund. The schedule is legislated and steps up over time:
| Financial year | SG rate |
|---|---|
| 2023–24 | 11.0% |
| 2024–25 | 11.5% |
| 2025–26 onward | 12.0% |
The 12% rate took effect on 1 July 2025 and is the permanent setting under current law. On a $95,000 salary, that's $11,400 per year flowing into super from your employer — taxed at 15% inside the fund ($1,710), so $9,690 lands as net contribution. Note: since 1 January 2020, salary-sacrificed amounts cannot reduce your OTE for SG purposes — your employer must pay SG on your pre-sacrifice base.
Contribution types and caps
Super contributions are categorised by whether tax has been paid before the contribution arrives in the fund:
- Concessional (before-tax) — includes employer SG, salary sacrifice, and personal contributions claimed as a tax deduction. Taxed at 15% inside the fund. Counts against the concessional cap of $30,000 per year (2025–26). Excess attracts excess concessional contributions tax.
- Non-concessional (after-tax) — personal contributions made from already-taxed income, not claimed as a deduction. No tax inside the fund. Cap is $120,000 per year (2025–26), or up to $360,000 in a single year using the bring-forward rule if you're under 75 and your total super balance is below the general transfer balance cap.
If you exceed the concessional cap, the excess is added to your assessable income (taxed at marginal rate) and you pay an excess concessional contributions charge. Always check year-to-date contributions in MyGov before late-financial-year contributions — employers report concessional contributions through STP but timing can lag.
Carry-forward of unused caps
Since 1 July 2018, individuals with a total super balance under $500,000 at the previous 30 June can carry forward unused concessional cap from the prior five financial years and contribute it on top of the current year's cap. The unused amounts are used on a first-in-first-used basis — so unused 2020–21 cap (currently the oldest still usable) expires after 2025–26.
Example: someone with a $300K super balance who contributed $15,000 in 2023–24 and $20,000 in 2024–25 can use the ($27,500 − $15,000) + ($27,500 − $20,000) = $20,000 of unused cap in 2025–26 on top of the current $30,000 cap, for a one-year cap of $50,000. This is especially useful in a year you sell an investment property and want to offset the CGT bill — see the CGT guide.
Salary sacrifice math
Salary sacrifice into super is one of the most effective tax-planning levers for Australian salary earners. On a $95,000 salary at a 32% marginal rate (30% bracket + 2% Medicare):
| Without sacrifice | Sacrifice $10,000 | |
|---|---|---|
| Gross salary | $95,000 | $95,000 |
| Salary sacrifice | $0 | $10,000 |
| Taxable income | $95,000 | $85,000 |
| Income tax + Medicare | $21,188 | $17,988 |
| Take-home pay | $73,812 | $67,012 |
| Sacrificed to super (after 15% contributions tax) | $0 | $8,500 |
| Total net wealth created | $73,812 | $75,512 |
Net win of $1,700 per year for someone on a 32% marginal rate. The cash-flow trade-off is real (take-home pay falls by $6,800) but the lifetime wealth math is clearly positive. For someone in the 37% or 47% bracket the saving is larger; below the 30% bracket the saving disappears.
Why fees matter so much
Annual super fund fees in Australia range from about 0.5% (some low-cost industry funds, balanced default options) to 1.5%+ (retail funds with premium products). The compounding impact over a 35-year working life is enormous.
On a $200,000 starting balance growing at 7% gross return, the difference between a 0.6% fee and a 1.3% fee over 35 years is roughly $220,000 in final balance — at no different return on assets, the fee differential alone consumes a six-figure chunk of retirement wealth. Always run the calculator with a net-of-fees return assumption, not a gross-of-fees market return.
Default insurance inside super
Most super funds automatically attach death, total & permanent disability (TPD), and sometimes income-protection cover when you join. Premiums are deducted from your super balance. Typical 2026 default-cover annual premiums by age:
| Age band | Typical default premium (death + TPD) |
|---|---|
| 20–30 | $200–$500/yr |
| 30–45 | $400–$900/yr |
| 45–55 | $900–$2,000/yr |
| 55–65 | $1,500–$3,500/yr |
Over a 35-year working life, default insurance premiums quietly drain tens of thousands from your balance. The cover can be very valuable — if you have dependants and would struggle to get equivalent cover outside super due to medical history, keep it. If you have no dependants, no debt, and the cover is duplicative of what you have personally, consider opting out or reducing it. Premiums are tax-deductible to the fund (a small additional benefit if you don't claim them personally).
Preservation age and access rules
You can generally access your super tax-free from preservation age (currently 60 for anyone born after 1 July 1964 — i.e. basically anyone still in the workforce today) provided you have retired or rolled into a transition-to-retirement income stream. From age 65 you can access super regardless of work status. Before preservation age, access is only available in narrow circumstances:
- Permanent incapacity (rigorously assessed)
- Terminal medical condition
- Severe financial hardship (must show inability to meet immediate family living expenses, after exhausting other reasonable options)
- Compassionate grounds (medical treatment, palliative care, funeral costs, mortgage default avoidance)
- First Home Super Saver (FHSS) — release of voluntary contributions and earnings for a first-home deposit
- Departing Australia permanently (DASP) for temporary residents
Early access on financial-hardship grounds is much more restrictive than most people assume — it is not the same as "I'd like to buy a house". The COVID-19 early-release scheme of 2020 was an exception that has since closed.
ASFA retirement targets — how much is enough?
The Association of Superannuation Funds of Australia publishes a quarterly Retirement Standard, the most widely-cited benchmark for retirement adequacy. For someone retiring around age 67 (mid-2025 figures):
| Lifestyle target | Single | Couple |
|---|---|---|
| Modest | ~$33K/yr / $100K balance | ~$47K/yr / $100K balance |
| Comfortable | ~$53K/yr / $595K balance | ~$75K/yr / $690K balance |
These assume the retiree owns their home outright and draws down on capital over retirement. The "comfortable" benchmark is the more commonly cited target. Note that an SG-only worker on average wages reaches the modest benchmark comfortably and approaches but does not always reach the comfortable benchmark by 67 — voluntary contributions or strong investment-return decades matter for the gap to comfortable.
The AussieCalc super calculator applies the 12% SG, lets you add voluntary contributions, and projects your balance at retirement.
Frequently asked questions
What is Division 293 tax?
A 15% additional tax on concessional super contributions when your combined income + concessional contributions exceed $250,000. Applies only to the portion above the threshold. Effectively raises tax on those concessional contributions from 15% to 30% — still well below the 47% top marginal rate, but the salary-sacrifice arbitrage is smaller for high earners.
What is the Government super co-contribution?
If you earn less than the lower threshold (around $45,000 in 2025–26) and make a personal after-tax contribution of $1,000, the government adds $500 to your fund (50% match). The benefit phases out between the lower and upper thresholds. One of the highest-percentage-return contributions you can make.
Should I consolidate multiple super funds?
Usually yes — you save duplicate fixed admin fees and duplicate insurance premiums. The ATO's online services show all your accounts. Before consolidating, check you won't lose existing insurance cover (e.g. grandfathered premiums from an employer's default cover) or trigger exit fees from a defined-benefit fund. Roll-overs are tax-free.
What's the difference between accumulation and pension phase?
Accumulation phase: you're contributing, earnings are taxed at 15% inside the fund, withdrawals (before preservation age) are limited. Pension phase: you've retired, the fund pays you a regular pension, earnings on assets supporting the pension are tax-free up to the transfer balance cap (currently $1.9M). Most super accounts are in accumulation phase until retirement.
Can I have an SMSF?
Yes — a Self-Managed Super Fund is a regulated super fund you operate yourself (with up to six members, usually family). It costs roughly $2,000–$5,000/yr to administer (accounting, audit, ASIC fees) and is generally only economic above ~$200K–$300K balance. SMSFs offer investment flexibility (direct property, niche assets) but come with significant compliance responsibility.
What is the First Home Super Saver (FHSS) scheme?
An ATO-administered scheme that lets first home buyers withdraw voluntary super contributions (concessional or non-concessional) plus deemed earnings to fund a home-deposit purchase. Maximum release $50,000 of contributions + earnings. Contributions count toward your concessional or non-concessional cap. Useful for FHBs who have additional savings capacity but otherwise no path into the property market.
How are super death benefits taxed?
Depends on the beneficiary. To a "tax dependant" (spouse, child under 18, financial dependant) — tax-free. To a "non-tax-dependant" (adult financially independent child) — the taxable component is taxed at 17% (or 32% if it's an untaxed element from an unfunded public-sector fund). Estate-planning matters significantly: a non-binding death benefit nomination can be redirected by the trustee, a binding nomination cannot.
Is super protected from bankruptcy?
Generally yes — balances in a regulated super fund are protected from creditors in bankruptcy under section 116 of the Bankruptcy Act 1966. There are exceptions where contributions are made with the intent to defeat creditors. Contributions made within the four years before bankruptcy may be clawed back if the trustee in bankruptcy can show that intent.