Zest! / SUPER 101

Which before-tax contribution option suits you?

To boost your super balance should you: (a) salary sacrifice before-tax dollars, or (b) contribute personally and claim a tax deduction? Our quick quiz could help you decide.

By Joel Atputharaj - 4 min read

A little about Joel

Joel Atputharaj is a senior manager at Russell Investments. A Fellow of the Institute of Actuaries, he helps clients navigate complexity and has worn many hats across the superannuation and consulting businesses, including actuarial consulting, account management, insurance and fund administration.

Your superannuation fund offers a tax-effective environment in which to save for your hard-earned retirement. In addition to any Superannuation Guarantee (SG) payments that you may receive from your employer, you can add to your super account by making contributions yourself to build a larger savings pool to fund your retirement dreams.  

There are several ways in which to do this, but it can be difficult to know which method will suit you best.  

One option is to contribute after-tax savings by making what is known as a ‘non-concessional’ contribution. We will explore non-concessional contributions in our next edition but for now, we are looking at what can be the most tax-effective way to add to your super fund—making a ‘concessional’ contribution.  

Concessional contributions are amounts that you add to your super account either:  

  • Before-tax via salary sacrifice, or 
  • As a personal deductible contribution. 

For the 2021-22 financial year, you can add up to $27,500 in concessional contributions This includes SG payments, salary sacrifice amounts and personal deductible contributions.  

Concessional contributions are taxed within super at 15 per cent, rather than at the marginal tax rate you pay on your income. Depending on your income, this could be a tax savings, giving you more in your account to invest. 

One great point about concessional contributions is that you can access unused concessional cap amounts from previous years via what’s called carry-forward rules. If your total super balance at the end of 30 June of the previous financial year is less than $500,000 and you made concessional contributions in the financial year that exceeded your concessional contributions cap, then you can make the most of unused cap amounts. But remember, these cap amounts are only available for five years, after which they expire. 

To help you decide which concessional contribution type could suit you best, we’ve put together a quick quiz. So, grab a pen and paper (or the ‘Notes’ app on your device) and note down your answers. If you don’t know the answer to some of the questions, you might need to check with your employer. 

Remember, this is only general information about the different types of concessional contributions and doesn’t take into account your objectives, financial situation or needs. Before you make an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. And if you'd like personal advice, we can refer you to the appropriate person. 

Contributions quiz 

1. Does your employer offer salary sacrifice arrangements?  

  1. Yes, that's an option offered in my workplace. 
  2. No, my employer does not offer salary sacrificing. 
  3. I don’t know. 

2. When you are managing your tax and financial affairs, do you typically prefer to: 

  1. Set up arrangements and leave them in place over time. 
  2. Stay flexible to take advantage of opportunities. 
  3. Have some structure, but some flexibility too. 

3. You expect to receive a tax benefit. When do you want to get it?  

  1. As soon as possible! 
  2. I’m happy to wait, as long as it arrives in my tax return.  
  3. I’d like part of it now and part of it in my tax return. 

4. When do you expect to be able to add extra to your super account?  

  1. Regularly every pay cycle – I want to make saving a habit. 
  2. Ad hoc – I'm not sure exactly when I will have cash to spare. 
  3. I would like to make regular contributions, but also add extra now and then. 

5. How frequently do you check your superannuation contributions and balance?   

  1. I regularly monitor my super contributions and balance to make sure I stay within the limits. 
  2. I only check my contribution levels and balance when I have a reason to find out
  3. I check my super contributions and balance from time to time. 


Your responses 

If you wrote down: 

Mostly ‘a’s – Salary sacrifice might suit you best.  

Salary sacrificing involves diverting some of your salary or wages directly into your super account rather than receiving it in your regular pay. To set up a salary sacrifice arrangement, you would need to talk to your employer, especially because not every employer allows it.  

If you can salary sacrifice, you can nominate a dollar amount or percentage of your pay each pay period to go into super. 

You receive tax benefits straight away because the money is taxed inside super at 15 per cent, rather than pay-as-you-go in your take-home pay. 

This method sets you up with a regular savings plan, but you will need to keep track to make sure you don’t exceed your contribution caps over the tax year, for example, if you get a pay rise that increases your SG or percentage-based salary sacrifice contribution. 

Mostly ‘b’s – Personal deductible contributions may be more your speed.  

Even if your employer does not allow salary sacrifice, you can usually make a tax-effective addition to your fund using a personal deductible contribution.  

This is an arrangement you make directly with your super fund. You will need to confirm your eligibility and fill in a form with your super fund, as well as note your contribution in your tax return. 

The tax outcome for your super fund and your take-home pay are similar at the end of the tax year to what they would be if you had been using a salary sacrificing arrangement, but you will need to wait until you complete your tax return to receive the tax benefit.  

This option can work well if you want to add extra amounts to super from sources other than your pay, for example, when you sell an investment or if you receive an inheritance. Salary sacrifice only works with employment income.  

While it’s good to check your super contributions and balance regularly, you only need to check at the time you are planning to make your contribution that you are within the concessional contribution limits, if you are making infrequent personal deductible contributions. And remember, personal contributions (generally ‘after-tax’ money) become concessional contributions once put into super with a 15% p.a. tax rate. 

Mostly 'c's – You may need to do more research.  

You could choose either or do both, provided you’re within the contribution limits.   

Also, have you checked out GoalTracker® yet? It’s personalised super, built around you. Set your retirement income goal with the GoalTracker program and find out if you’re on track to get there. From there, it’s an easy step to work out what your options and next steps are. Importantly, it will help you to work out how much you need to contribute to achieve your goal—it really is super easy! 


Issued by Total Risk Management Pty Ltd ABN 62 008 644 353, AFSL 238790 (TRM) as the trustee of the Russell Investments Master Trust ABN 89 384 753 567. Resource Super and Nationwide Super are divisions of the Russell Investments Master Trust. This article provides general information only and has not been prepared having regard to your specific objectives, financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. The information has been compiled from sources considered to be reliable, but is not guaranteed. Any examples have been included for illustrative purposes only and should not be relied upon for the purpose of making an investment decision. Past performance is not a reliable indicator of future performance. The Product Disclosure Statement (PDS) can be obtained by phoning 1800 555 667 or by visiting russellinvestments.com.au or for Nationwide Super by phoning 1800 025 241 or visiting nationwidesuper.com.au. Any potential investor should consider the latest PDS in deciding whether to acquire, or to continue to hold, an investment in any Russell Investments product. The Target Market Determinations for the Russell Investments Master Trust are available on our website. The Financial Services Guide for the Russell Investments Master Trust is available on our website or on the Nationwide Super website.

Russell Investment Financial Solutions Pty Ltd ABN 84 010 799 041, AFSL 229850 (RIFS) is the provider of MyTracker and the financial product advice provided via GoalTracker Plus. TRM and RIFS are part of Russell Investments. Russell Investments or its associates, officers or employees may have interests in the financial products referred to in this document by acting in various roles including broker or adviser, and may receive fees, brokerage or commissions for acting in these capacities. In addition, Russell Investments or its associates, officers or employees may buy or sell the financial products as principal or agent. If you decide to purchase or vary a financial product, Russell Investments and/or other companies within the Russell Investments group of companies will receive fees and other benefits, which will be a dollar amount or percentage on the value of your investments and/or your insurance fees. You can ask us for more details. General financial product advice is provided by RIFS or Link Advice Pty Ltd (Link Advice) ABN 36 105 811 836, AFSL 258145. Limited personal financial product advice is provided by Link Advice.

This work is copyright 2022. Apart from any use permitted under the Copyright Act 1968, no part may be reproduced by any process, nor may any other exclusive right be exercised, without the permission of Russell Investments.