Voluntary Super Contributions: Why You Should Start (Yesterday!)

By Ross Marshall.   Posted: November 2020

Voluntary super contributions are something that every worker or employee should be aware of. They offer a host of benefits, including paving the way for early retirement. Here’s everything you need to know about voluntary super contributions and why you should start now.

What are voluntary super contributions?

Superannuation or “super” is defined by the Australian Taxation Office (ATO) as “money set aside during your working life for when you retire.” Meanwhile, a voluntary super contribution, also known as a personal contribution, is money you choose to pay into your super fund from your savings or after-tax income. It is separate from salary sacrificing, which is done before your income is taxed.

Personal contributions are non-concessional contributions and will be included to your non-concessional contributions cap unless you have a claimed tax deduction to them.

Are you eligible for super?

You are eligible to receive super from your employer if you:

  • Earn $450+ per month
  • Are aged 18 or over

If you’re employed, your employer should be paying a portion of your earnings into a super account, even for a contractual job. Meanwhile, self-employed Australians often make tax-deductible personal contributions.

The ATO has an online assessment that helps determine if you are entitled to superannuation. It asks some questions about your work arrangements between you and your employer, and you will get a decision advising whether you are entitled to super from your mentioned employer.

Different types of super contributions

Your payments to your super account will always be classed as either concessional contributions or non-concessional contributions. It’s important to understand the difference, because you pay them in slightly different ways and get taxed differently on them.

Concessional contributions are either contributions from your employer or from your salary sacrifice (a portion of your salary you set aside to automatically be paid into your super fund) before you’ve paid tax on it. These concessional contributions are not taxed at your marginal tax rate, and are taxed at a lower “concessional” tax rate instead – hence the name. Concessional contributions are capped at $25,000 per year – if you go over this, your excess contributions will simply be taxed at a marginal rate instead.

Non-concessional contributions are when you contribute your own after-tax money into your super fund. You can make up to $100,000 in non-concessional contributions each financial year.

There are numerous strategies around the best ways to use these two payment methods to get the most out of the system – including how to offset capital gains tax, reduce your marginal tax rate, and get the most out of the “carry forward cap”. Speak to our expert financial planners today to make your money work for you, instead of the other way around.

Division 293 tax: A note for high income earners

If you are a high-income earner, your marginal tax rate is higher than that of an average income earner’s, so you receive a larger tax concession whenever you make concessional contributions to your fund.

Division 293 tax is an extra 15% tax on the super contributions of high-income earners. This tax is charged if your income plus your concessional super contributions are above $250,000. Division 293 tax adds an additional tax of 15% to bring high-income earners’ concession back to an amount in line with the average.

Confused? Does this apply to your income threshold? (Remember, you have to factor in one-off events such as capital gains.) Contact us today, and we’ll help clarify, and find the best way to manage your income and super contributions to get your maximum value.

Why should you make voluntary super contributions?

There are many benefits to having a super fund, including building up your wealth or helping you get that comfortable, early retirement. How much you contribute to your voluntary super contributions is entirely up to you—whether you can afford to do it regularly or as a one-off payment.

Here’s why you need to consider voluntary super contributions:

  • You’re “purchasing” an earlier retirement.

If you’re planning to retire comfortably, making contributions into your super can be an efficient way to boost the amount of money you have to live off upon retirement. And the sooner you start, the more beneficial it will be for your savings.

  • They reduce your tax and build your wealth.

Voluntary super contributions can reduce your taxable income. Generally, the contribution will be taxed in the fund at the concessional rate of up to 15%, instead of the marginal tax rate (which depends on your income). Depending on your situation, this strategy could end up in a tax saving of up to anywhere between 10-32%, helping you to increase your super even more.

Moreover, your extra income can work harder for you in the super system because the tax office will treat your investment earnings differently; your investment earnings outside super can be taxed up to 45%, depending on the type of investment. Compare that amount to the 15% maximum tax rate you would have to pay in super investment earnings.

Tip: checking which tax bracket you fall into (and by how much) will help you determine how much you can/should be putting into your super. Depending on your situation, it could be a no-brainer.

How to start making voluntary super contributions

So now you know what voluntary super contributions are and how they benefit you, you’re probably wondering how to get started. It can be intimidating at first, wondering where the extra money will come from, but here are two simple strategies to help you maximise your super savings without compromising your lifestyle:

  1. You can slowly transition into voluntary contributions by increasing your salary sacrifice by a few percent each year.

Salary sacrificing is a widely under-used tactic for making your money work for you. Not only do you not pay the full marginal tax rate on it, but if you set it up to auto-deposit to your super fund then it comes straight out of your paycheck – essentially, you’ll never miss money you never had!

  1. When you get a pay rise, put it towards your super fund.

If you’re like many Australians, there’s a good chance you’re pretty locked into a weekly or monthly budget. Getting a pay rise or an extra source of income feels like a welcome relief, but in truth most people will quickly find a way to spend this on non-essential items. Putting your extra income towards your super means that you’ll be getting a great ROI without affecting your lifestyle.


Making voluntary super contributions is one of the key strategies in building your wealth and a comfortable future. There are plenty of strategies you need to familiarise yourself with depending on your current circumstances.

Consulting with a financial advisor is a great way to obtain advice for making well-informed decisions.

Raeburn Advisors help you focus on making efficient financial decisions, giving concise, digestible financial advice, helping you manage your wealth better and make efficient investments that will secure your future.  Contact us to book a consultation, and let’s talk about your retirement goals.

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This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.

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