Very high on client’s list are “I would like to” …

  1. save tax,
  2. grow my wealth,
  3. pay off my mortgage.

Making extra super contributions in this low interest rate environment presents the unusual opportunity to focus on 1 & 2 ahead of 3 i.e. paying less of your extra money off the mortgage.


  1. Your salary is $130K p.a. hence you are on a marginal tax rate 38.5%
  2. Super contributions are taxed at 15%
  3. That is a 23.5% tax saving, nearly ¼!
  4. You will have a greater net outcome making extra super contributions and this money will grow faster over time in super due to compound returns at this lower tax rate.
  5. Normally it would be wise to pay off the mortgage as it is not tax deductible, but we are in a very low interest rate environment.
  6. Now the maximum concessional contributions (CC) amount allowed is $27.5K p.a. and this includes your employer SGC paid for you.
  7. SGC is 10%, in this case 13K p.a.
  8. You can make up to $14.5K in salary sacrifice (SS) or personal deductible contributions (PDC).
  9. Any extra money you have after this can still be used to reduce the mortgage faster.

You can either get your employer to salary sacrifice (simpler):

  1. Ask the payroll section to then make a salary sacrifice contribution for you that brings your total to under the $27.5K. e.g. you could request 14.5K over the year to be salary sacrificed.
  2. If you have a pay rise during the year, then this may affect the extra super calculation but you can then reduce or cease the salary sacrifice amount to avoid an excess contribution.
  3. With salary sacrifice always ensure that your SGC amount remains as per your original salary amount i.e. 13K – check your employer does not reduce it!

You can do it yourself (preferred):

  1. The alternative way is that you make a Personal Deductible Contribution (PDC), this has the same outcome as salary sacrifice but you do it and you claim the tax deduction on your yearend tax return.
  2. You need the cash flow to make the contributions regularly, so maybe schedule the amount each payday with a regular DD.
  3. A PDC is controlled by you and hence should reduce the chance of exceeding the concessional contribution cap.
  4. All you need is the correct super contribution payment information, BPAY normally.
  5. You must remember to submit to your super fund a “notice of intention to claim a deduction for personal super contributions” this can be done on or before, effectively whichever occurs earliest, either the day you lodge your tax return in the year contributions were made, or the last day of the financial year in which you made the contribution (ATO 2018).

Excess contributions are amounts over the maximum CC, the ATO will charge extra tax on the excess (ATO 2021).

The SGC, CC and MTR amounts used in this example are currently correct, however these may change over time and should not be acted on without consulting your adviser.

General Advice warning: the information in this article is general in nature, it is not advice specific to your needs. If you want to act upon the information in this article then you should seek advice from a qualified professional. VJC WM accepts no liability to any party for acting from this information unless they have sought advice in a formal engagement with VJC WM for this purpose.