How boosting your super can help you reduce your tax bill

.

One of the best ways to grow your super balance is to make additional concessional (pre-tax) contributions while you’re in the workforce.

Thanks to the power of compound interest, paying a little bit extra to your super can make a big difference by the time you retire.

Importantly, if you make concessional contributions — either by salary sacrificing or making an eligible personal super contribution — you could also reduce your tax bill.

Here’s how it works.

The potential tax benefits you could be missing out on

Let’s assume you are an employee earning $90,000 before tax, excluding any mandatory super contributions from your employer, and don’t have any additional income from investments or other sources.

If you redirected $5,000 of your annual pay into salary sacrifice super contributions, you would save $1,600 in income tax over the course of a financial year.

That means your annual take-home (net) pay would fall by $3,400, but your super balance would be boosted by $4,250, after factoring in taxes on your extra contributions. In other words, this strategy will result in the total combined take home pay and super contributions increasing by $850.

Source: ASIC MoneySmart Notes: Tax rates current as of the 2025 financial year. Assumes 11.5% superannuation guarantee. From 1 July 2025, the superannuation guarantee is increasing to 12%.

The potential tax benefit will depend on your income and marginal tax rate. The higher your income, the higher the potential tax savings from making additional contributions.

ASIC MoneySmart’s calculator is a simple way to check the impact of making additional contributions based on your own income.

Don’t want to salary sacrifice? You can make a lump sum contribution before June 30

If you want to set up a salary sacrificing arrangement, you’ll need to talk to your employer or payroll provider, and some employers may not offer it.

The good news is you can still boost your super balance and save on tax by making a personal super contribution before June 30 and claiming a tax deduction.

You’ll end up with the same tax benefits as you would with salary sacrificing; you’ll just have to wait until you’ve finalised your tax return.

If you’d like to make a personal concessional contribution to your Vanguard Super account, here’s the process:

• Make a personal after-tax contribution from your bank account, using BPAY. You can do this by logging into Vanguard Online.
• You can find your BPAY details in Account activity > Make a contribution > Learn more. Make sure that your tax file number (TFN) is linked to your account.
• To claim a tax deduction, you must complete a Notice of intent form. Once you have filled it out, you can upload it in Vanguard Online via secure message or return it to us via mail using the address on the form.
• You need to notify your super fund that you intend to claim a tax deduction by the earlier of these two dates:        
  • The day you lodge your tax return for the financial year you made the contributions.
  • The last day of the financial year following the year you made the contributions. That would be 30 June 2026 for contributions made this financial year.
  • If the notification is not made by the earlier of these two dates, you may not be able to claim the tax deduction.
  • For more information, visit the ATO’s website.
• To ensure your contributions and tax deductions are counted in this financial year, we recommend you complete these steps at least a week prior to June 30.

What to know about the concessional contributions cap

You can contribute up to $30,000 to your super this financial year at the favourable tax rate of 15%. These are known as concessional contributions, and the cap includes any mandatory contributions from your employer.

However, if your total super balance is less than $500,000, you can carry forward any unused portion of the concessional contribution cap up to five previous financial years. This means you may be able to contribute more than the cap without paying more tax.

You can keep track of your concessional contributions using the ATO’s online service in myGov. You can select Super, then Information, then Concessional contributions.

If you have a Vanguard Super account, you can check how much you’ve contributed to your account in Vanguard Online under Account activity.

If you go over the cap, excess contributions will be included as part of your assessable income and taxed at your marginal tax rate (with a 15% tax offset), plus an excess contribution charge.

Why your age matters when topping up your super

Finally, keep in mind there are some restrictions around claiming tax deductions for super contributions.

For example, if you're between 67 and 74 years old, you must meet the work test or work test exemption to claim a tax deduction for personal super contributions.

If you're over 75, your super fund can still accept compulsory employer contributions, but it can only accept personal contributions within 28 days after the end of the month you turn 75.

For a full list of eligibility criteria, visit the ATO’s website.

Vanguard Super Pty Ltd (ABN 73 643 614 386 / AFS Licence 526270) (the Trustee) is the trustee of Vanguard Super (ABN 27923449966) and the issuer of Vanguard Super products. The Trustee has contracted Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) (VIA) to provide some services to members of Vanguard Super. Any general advice is provided by VIA. The Trustee and VIA are both wholly owned subsidiaries of The Vanguard Group, Inc. (collectively, "Vanguard"). 

By Vanguard
23 APRIL 2025
vanguard.com.au