By Philippa Billings, Chief Advice Officer, Otivo
Super is one of the most tax-effective structures available to Australians, and much of that advantage is by design, the system deliberately rewards putting money away for retirement. Used within the rules, super offers several legitimate ways to reduce the tax you pay. This is general information rather than personal tax advice, but here's how the main super tax levers work.
Super can reduce your tax mainly because concessional contributions are generally taxed at 15% rather than your marginal rate. Salary sacrifice, personal deductible contributions, and features like the government co-contribution and spouse contribution tax offset can all play a part. As at July 2026, the concessional contributions cap is $32,500, and this is general information, not personal tax advice.
How does super reduce the tax you pay?
The core mechanism is the concessional tax rate. Concessional contributions, money going into super before tax, are generally taxed at 15% as they enter the fund, rather than at your marginal income tax rate. For most working Australians that marginal rate is higher than 15%, so directing income into super as a concessional contribution can mean it's taxed more lightly than if taken as salary. Earnings inside super are also taxed at a concessional rate, which is a further, ongoing advantage.
What role do salary sacrifice and personal deductible contributions play?
These are the two main ways to make concessional contributions beyond compulsory super. Salary sacrifice redirects part of your before-tax pay into super, taxed at 15% rather than your marginal rate. Personal deductible contributions are amounts you contribute yourself and then claim as a tax deduction, which requires lodging a valid notice of intent with your fund and having it acknowledged before the earlier of the day you lodge your tax return for that year or the end of the following financial year. Both count towards the concessional cap of $32,500 for 2026-27, alongside employer super guarantee.
What about high income earners and Division 293?
There's a threshold where the benefit narrows. Under Division 293, individuals whose combined income and concessional contributions exceed $250,000 in a year pay an extra 15% on the concessional contributions above that threshold, taking the tax on those to 30%. Even then, for someone on the top marginal rate, contributions taxed at 30% remain concessionally taxed compared with income taxed at their full rate. So the super tax advantage still applies to high earners, just to a reduced degree.
Are there other super-related tax features?
Yes, several are worth knowing about in general terms. The government co-contribution can add money to the super of eligible lower-income earners who make an after-tax contribution. The spouse contribution tax offset can give a tax offset to someone contributing to a low-income spouse's super. And the low income super tax offset effectively refunds some contributions tax for low earners. The eligibility rules and amounts for these are set by the ATO and change over time, so the ATO is the place to check the current detail.
What should you keep in mind?
A few things. These levers work within limits, chiefly the contribution caps, and going over them has its own tax consequences. The trade-off for the tax benefits is that super is preserved until retirement, so the money isn't accessible in the meantime. And because everyone's tax position is different, how these general rules apply to you depends on your circumstances. This is general information about how super interacts with tax, not personal tax advice, so it's worth confirming your own position with a professional.
Frequently asked questions
How does putting money into super reduce tax?
Concessional contributions are generally taxed at 15% going into super rather than at your marginal rate, which for most people is higher. Redirecting income into super as a concessional contribution can therefore mean it's taxed more lightly, within the contribution caps.
Can I claim a tax deduction for super contributions?
You can claim personal deductible contributions, which are concessional, provided you lodge a valid notice of intent with your fund and it's acknowledged within the required timeframe. These count towards the concessional cap alongside employer contributions and salary sacrifice.
Are there tax benefits in super for lower-income earners?
Yes. Features such as the government co-contribution, the spouse contribution tax offset and the low income super tax offset can benefit eligible lower-income earners. The current rules and amounts are set by the ATO.
Where to from here
Used within the rules, super is a genuinely tax-effective way to build for retirement. Otivo, a licensed Australian financial advice platform holding AFSL and Australian Credit Licence No. 485665, offers a tax-deductible personal contributions module that helps you understand your eligibility and whether claiming a deduction makes sense, based on your income, age and surplus. For your personal tax position, a tax professional is the right port of call.
Sources
- Australian Taxation Office — tax and super, concessional contributions, Division 293, co-contribution and spouse contributions — ato.gov.au
- ASIC MoneySmart — super and tax — moneysmart.gov.au
Disclaimer
The information in this communication is current as at July 2026 and has been prepared by Otivo Pty Ltd ABN 47 602 457 732, AFSL and Australian Credit Licence No. 485665. This content is general information only and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial or taxation advice and should not be relied on as such. Before acting on any information, you should consider its appropriateness having regard to your personal circumstances. This material must not be reproduced in whole or in part, or posted on any social media platform, without the prior written consent of Otivo Pty Ltd.