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Super
Merit Financial Services · February 2026 · 7 min read
Superannuation remains the most tax-effective long-term savings vehicle available to Australians. Contributions are taxed at just 15% (compared to marginal rates of up to 47%), investment earnings are concessionally taxed, and in retirement, income from super can be completely tax-free. But the rules around contributions are intricate, with multiple caps, conditions, and strategies that can make a significant difference to your retirement outcome.
Concessional contributions are contributions made from pre-tax income. They include:
The concessional contribution cap for 2025/26 is $30,000 per person per year. All concessional contributions (SG + salary sacrifice + personal deductible) count towards this single cap. Exceeding the cap results in the excess being included in your assessable income at your marginal tax rate, plus an interest charge.
If your total super balance was below $500,000 at the previous 30 June, you may be able to use unused concessional cap amounts from the previous five financial years. This is enormously valuable for people who have had periods of lower income, career breaks, or simply haven't maximised contributions in prior years.
For example, if you made $22,000 in concessional contributions in each of the past three years (against a $30,000 cap), you have $24,000 in unused cap space. In the current year, you could contribute up to $54,000 ($30,000 current cap + $24,000 carry-forward) in concessional contributions.
Salary sacrifice is an arrangement where you agree with your employer to forgo part of your pre-tax salary in exchange for additional super contributions. The sacrificed amount is taxed at 15% inside super rather than at your marginal rate.
For someone earning $120,000, sacrificing $10,000 into super saves approximately $2,450 in tax compared to receiving the same amount as salary (assuming a 39% marginal rate including Medicare levy). Over 20 years with investment returns, this annual tax saving compounds significantly.
Important: salary sacrifice is typically arranged prospectively — you can only sacrifice future salary, not amounts already earned.
Non-concessional contributions (NCCs) are contributions made from after-tax money where no tax deduction is claimed. They are not taxed upon entry to the fund (since the money has already been taxed). The NCC cap for 2025/26 is $120,000 per person per year.
If you are under 75, you can bring forward up to three years of NCC caps in a single year — contributing up to $360,000 in one hit. This is particularly useful for lump-sum investments into super, such as proceeds from the sale of a property or an inheritance.
The bring-forward rule is automatically triggered when you exceed the annual cap in a financial year. However, your ability to use the full three-year amount depends on your total super balance:
If your total income is below $60,400 (2025/26) and you make a personal non-concessional contribution, the government may contribute up to $500 to your super. The co-contribution phases out as income increases from $45,400 to $60,400. It's essentially free money for lower-income earners — yet many eligible people don't claim it simply because they're unaware it exists.
If your income plus concessional super contributions exceed $250,000, an additional 15% tax applies to the lesser of the excess or the concessional contributions. This means high-income earners effectively pay 30% tax on their concessional contributions instead of 15%.
Even at 30%, super contributions remain attractive for high earners compared to a 47% marginal rate. The tax saving is 17 cents per dollar rather than 32 cents — still meaningful, especially over a long accumulation period.
If your spouse earns less than $40,000 per year, you can make a non-concessional contribution to their super fund and receive a tax offset of up to $540. The maximum offset applies when you contribute $3,000 and your spouse's income is below $37,000. The offset reduces as spouse income rises from $37,000 to $40,000.
Beyond the tax offset, spouse contributions are a valuable strategy for building retirement savings for a lower-earning partner, ensuring both members of a couple have adequate super balances.
Australians aged 55 or over who sell a home they've owned for at least 10 years can contribute up to $300,000 each (or $600,000 for a couple) into super as a downsizer contribution. These contributions:
Downsizer contributions are one of the few ways to get large sums into super outside the normal cap framework. They're particularly powerful for people who have excess home equity relative to their super balance.
Use our Salary Sacrifice Calculator to see how additional contributions could boost your retirement savings, or contact Merit to build a personalised contribution strategy.
