Why invest in super?

Super may be the largest investment people make but many are unaware of the special tax benefits available. These benefits are not available through any other type of investment.

Over the long term, the special tax rules applied to super can make a significant difference in how much you are able to save for your retirement:

  • You can make super contributions with before-tax income (often known as salary sacrificing). Your concessional contributions to super, and any investment earnings, are generally taxed at 15%1, up to your concessional contributions cap, while your income may be taxed up to 49%.
  • When you have reached your Commonwealth preservation age2 and meet a condition of release, you can withdraw up to $195,0003 at a rate of 0%, and when you turn 60 any withdrawal is tax-free (GESB Super members pay tax on contributions to their fund, while West State Super and Gold State Super members pay tax when they access their benefit, so this tax treatment may differ).
  • After-tax contributions may receive a co-contribution from the government, if you are eligible. For more information, please see co-contributions
  • The low income super contribution (LISC) is another type of government super payment to help low income earners save for their retirement. For more information visit the ATO website.

1 The concessional tax treatment of certain super contributions is reduced for very high income individuals. An individual's income is added to certain super contributions (referred to as low-tax contributions) and compared to the high income threshold of $300,000. Tax is payable on any excess low tax contributions if the combination of income and low-tax contributions exceeds the $300,000 threshold. There are special rules for defined benefit interests, constitutionally protected state higher level office holders, certain Commonwealth justices and temporary residents who depart Australia. For more information, read the Tax and super brochure or visit the ATO website.
2 Your Commonwealth preservation age is dependent on your date of birth. For more information on your Commonwealth preservation age, read the Accessing your super brochure.
3 For the 2016/17 financial year, indexed annually for future years.


What difference can these tax rules make to retirement savings?

The following table shows the possible benefits of salary sacrificing to your super account. Amanda is a GESB Super member, and receives an annual salary of $70,000. She would like to make contributions of $100 per week ($5,200 a year) into her account.

  No voluntary super
contributions
With voluntary
contributions
(from after-tax income)
With salary sacrifice
contributions
(from before-tax income)
Gross income $70,000 $70,000 $70,000
Salary sacrifice amount $0 $0 $5,200
Taxable income $70,000 $70,000 $64,800
Less income tax including Medicare levy
(based on individual resident tax rates
for 2016/17)
$15,697

$15,697

$13,8754

After-tax income  $54,303 $54,303 $50,925
After-tax voluntary contribution $0 $5,200 $0
Total take-home pay $54,303 $49,103 $50,925
Net amount into Amanda's super5 $0 $5,200 $4,420
Total benefit (take-home pay + any contributions to super)  $54,303 $54,303 $55,345

4 Includes low income tax offset of $28. 
5 Salary sacrifice contributions are generally taxed at the concessional rate of 15% within the super fund. If you are a high income earner whose income and relevant concessionally-taxed contributions exceed $300,000 then you may be liable for Division 293 tax. It applies to both GESB Super and West State Super members. For more information read the Tax and super fact sheet.
Please note: the figures are for the 2016/17 financial year.

If she enters into a salary sacrifice arrangement with her employer, Amanda can contribute $5,200 into her super without reducing her annual after-tax income by the same amount. This is because she will only pay income tax on $64,800 instead of $70,000. Her tax will reduce by $1,822 ($15,697 - $13,875), and her take-home pay will only reduce by $3,378 ($54,303 - $50,925).

If you convert this to a weekly amount (as Amanda makes a $100 per week contribution to her super), then she reduces her income tax by about $35 per week. Also, her take-home pay only reduces by about $65 per week.

The table also shows that Amanda increased her 'Total benefit' (take-home pay + any contributions to super) by $1,042 ($55,345 - $54,303) through salary sacrificing. This takes into consideration the 15% contributions tax on her salary sacrifice.

For more information please see the GESB Super salary sacrifice fact sheet or the West State Super salary sacrifice fact sheet.

How can you take advantage of super?


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