Superannuation back to basics: Understanding contributions
Whether you manage your own self-managed superannuation fund or simply want to maximise your retirement savings, understanding contributions is essential to building long-term wealth, writes BDO’s Lisa Philip.
At BDO, we understand that superannuation can sometimes feel complex and confusing, especially when you’re trying to make sense of the terminology.
That’s why we’ve created our ‘Superannuation back to basics’ series, which is a series of articles written in plain English to help simplify superannuation and help you feel confident about your financial future.
In this article, we break down one of the most important parts of super: contributions. Whether you manage your own self-managed superannuation fund (SMSF) or simply want to maximise your retirement savings, understanding contributions is essential to building long-term wealth and taking control of your financial future.
What are superannuation contributions?
In simple terms, contributions are payments made into your super fund. They form the foundation of your retirement savings and can come from a number of different sources – your employer, yourself, or even the government.
Types of contributions
There are several types of contributions you might come across throughout different stages of your life:
1. Employer contributions (Super Guarantee)
Your employer is required by law to make Super Guarantee (SG) contributions into your super fund. From 1 July 2025, the SG rate is 12 per cent of your ordinary time earnings.
For example, if you earn $80,000 a year, your employer must contribute at least $9,600 into your superannuation fund. You don’t need to do anything to receive these contributions except advise your employer of your super fund details. These contributions are taxed at 15 per cent, so if your employer contributes $9,600, your super fund will pay tax of $1,440.
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It’s also worth checking your payslip and superannuation statement to make sure your superannuation contributions are being paid correctly and on time.
2. Voluntary Contributions
You can also choose to top up your superannuation on top of the compulsory SG payments by making additional contributions. Even small amounts can make a big difference over the long term, thanks to compounding growth.
Voluntary contributions fall into two main categories:
Concessional (pre-tax) contributions
These include salary sacrifice arrangements, where you direct part of your before-tax salary into superannuation (you’d need to make this request with your employer) and personal contributions, which you claim as a tax deduction.
Just like employer contributions, these are taxed at 15 per cent within your super fund, which is often lower than your marginal tax rate.
If your total super balance is under $500,000, you may also be able to use the carry-forward rule, which lets you use any unused concessional cap amounts from the previous five years to make larger contributions in a later year.
Non-concessional (post-tax) contributions
These are contributions you make from your take-home pay or savings. Because you’ve already paid income tax on this money, they are not taxed again in your super fund.
These contributions you are often used when individuals receive a windfall or lump sum, such as an inheritance or the sale of an asset, and want to move that money into the tax-effective superannuation .
3. Government co-contributions
To encourage savings, the government has a scheme in place to boost the contributions of low- and middle-income earners. If your income is below a certain amount and you make after-tax contributions, the government may contribute up to an additional $500 into your superannuation fund.
For example, if you earn less than $45,488 (in the current financial year) and contribute $1,000 of your own after-tax money, the government will add the full $500 to your fund.
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The maximum co-contribution reduces with larger incomes and cuts out once you reach $62,488 (in the current financial year).
Other contribution strategies
While the three categories above cover the most common contributions, there are also some additional strategies:
- Spouse contributions: You may be able to contribute to your spouse’s superannuation and receive a tax offset if they are a low-income earner
- Downsizer contributions: If you’re over age 55 and sell your home, you may be able to contribute up to $300,000 of the proceeds into superannuation without affecting your non-concessional cap. There are several conditions that must be met before you can do this, so it is important to check that you are eligible before making the contribution. Reach out to your financial adviser for tailored advice on making a downsizer contribution
- Superannuation on paid parental leave: The government has now commenced paying superannuation on Commonwealth Paid Parental Leave, helping to boost balances for parents taking time out of the workforce.
Why make extra contributions?
Adding to your superannuation on top of the compulsory employer contributions can be a powerful way to build your retirement savings. There are several benefits:
- You’ll grow your retirement savings faster: Voluntary contributions boost the amount invested in your super, which means more money working for you over the long term. Even modest top-ups, such as $20 or $50 a week, can add up to thousands more by the time you retire, especially if you start early
- You can potentially reduce your taxable income: If you make concessional (before-tax) contributions through salary sacrifice or personal deductible contributions, they are usually taxed at 15 per cent in your fund – which is often lower than your marginal tax rate. This means you can save on tax today while growing your future balance
- You’ll benefit from compound returns: The earlier you contribute, the more time your money has to grow. Compound returns mean you earn returns not only on your contributions but also on the investment earnings they generate. Over decades, this effect can be significant. For example, contributing just $100 a month from age 30 instead of 40 could mean tens of thousands of dollars more in retirement savings down the road, depending on investment returns.
Even small, regular contributions on top of your employer SG payments can make a meaningful difference to your financial security in retirement, helping you take control of your future.
Contribution caps
It’s important to be aware that there are annual limits – known as contribution caps – on how much you can add to super at the concessional (pre-tax) and non-concessional (post-tax) rates.
- Concessional contributions cap
From 1 July 2025, the concessional contributions cap is $30,000 per year, covering employer contributions (including SG), salary sacrifice, and personal deductible contributions. If your total super balance is under $500,000, you may also be able to use the carry-forward rule, which lets you use any unused concessional cap amounts from the previous five years to make larger contributions in a later year. - Non-concessional contributions cap
The non-concessional contributions cap is currently $120,000 per year, with the option to bring forward up to three years’ worth (up to $360,000) if you are under the age of 75 and meet the total superannuation balance (TSB) requirements.
Exceeding these caps can lead to extra tax, so it’s worth keeping track of how much is going into your super each year.
How BDO can help
Whether you’re just starting out or looking to boost your balance, understanding superannuation contributions and using them strategically can make a significant difference to your retirement lifestyle, and puts you in control of your financial future.
Our superannuation specialists work with you to design tailored contribution strategies that maximise tax efficiency and long-term growth. If you’d like to explore how to optimise your super contributions, contact our superannuation team today for personalised advice.
Disclaimer
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