How Australian superannuation works in 2025-26
Superannuation, almost always shortened to "super", is Australia's compulsory retirement savings system. Every employer must pay a percentage of your salary into a super fund on top of your wages. That money is locked away until you reach your "preservation age" (currently 60), at which point you can access it tax-free. It is one of the largest financial decisions of your working life, and yet most people pay it almost no attention until they are near retirement.
The standard Super Guarantee rate rose to 12% on 1 July 2025, completing a gradual increase from 9.5% in 2021. For a worker on $80,000 a year, that is $9,600 going into super annually, which compounds to roughly $400,000-$700,000 by retirement depending on fund returns and fees.
How super contributions work
- Super Guarantee (SG): your employer pays 12% of your ordinary time earnings into your fund. This is on top of salary, not from it
- Salary sacrifice: you can choose to have additional pre-tax salary diverted into super. Taxed at 15% inside super versus your marginal rate (up to 47%) outside
- Personal concessional contributions: you can claim a tax deduction for personal super contributions, up to the annual cap
- Non-concessional contributions: you can also put after-tax money into super (up to a higher cap), useful for boosting balance closer to retirement
- Annual cap: $30,000 concessional and $120,000 non-concessional per year in 2025-26
Tax inside super versus outside
Money inside super is taxed at concessional rates - 15% on contributions and earnings, dropping to 0% in the pension phase after retirement. Compare that to outside super, where investment earnings are taxed at your marginal rate (up to 47%). This tax advantage compounds over decades and is the main reason financial advisers recommend salary sacrificing if you can afford to.
Choosing your super fund
Most Australian workers can choose their own fund. The default if you do not choose is typically your employer's nominated fund, which may not be optimal. Key things to compare:
- Long-term returns: 7-10 year returns matter much more than last year's. The ATO YourSuper comparison tool publishes returns
- Fees: aim for under 1% of balance per year all-in. A 1% difference compounds to $200,000+ over a working lifetime on average balances
- Investment options: most funds offer "high growth", "balanced", "conservative" etc. For most under-50s, high growth or balanced is the right default
- Insurance: most super funds include death and TPD cover, sometimes income protection. Useful but worth checking the premiums are not eating returns
- Performance test: APRA runs an annual test that flags underperforming MySuper products. Avoid funds that fail
Super for visa holders and non-residents
If you work in Australia on a temporary visa, your employer must still pay super for you. When you leave Australia permanently, you can claim a Departing Australia Superannuation Payment (DASP) to withdraw your super balance, less DASP tax of around 35-65% depending on visa type and contribution source. Working Holiday Makers (417/462) pay the highest DASP rate at 65%, designed to discourage tax-driven super accumulation.
Frequently asked questions
What happens to my super when I retire?
You can access your super once you reach your preservation age (60 for anyone born after 1 July 1964) and retire from work, or at 65 regardless of work status. Most people choose to convert their super into an "account-based pension" which pays a regular tax-free income. You can also take lump sums, or keep working and access super at the same time.
Should I salary sacrifice into super?
For most people on middle to high incomes, yes. The tax savings are significant. A worker on $90,000 paying 30% tax saves 15 cents on every dollar they salary sacrifice (30% marginal rate minus 15% super tax). The trade-off is that the money is locked away until retirement, so only sacrifice money you do not need in the next 20-30 years.
What is the difference between concessional and non-concessional contributions?
Concessional contributions are made pre-tax (employer SG, salary sacrifice, deductible personal contributions). They are taxed at 15% on the way in but you get the marginal-rate tax saving. Non-concessional contributions are made after-tax. They are not taxed again on the way in (you have already paid tax on the money). The concessional cap is $30,000/year, non-concessional is $120,000/year.
I have multiple super accounts - is that a problem?
Yes. Multiple accounts mean paying multiple fee sets and multiple insurance premiums. Most workers should consolidate to one fund. Use the ATO's free consolidation service through MyGov - it takes 10 minutes and saves $200-$1,000 per year in duplicated fees. Before consolidating, check whether any of your accounts include insurance you would lose by closing.
Can I use my super to buy a house?
Generally no, but the First Home Super Saver Scheme (FHSSS) lets first-home buyers withdraw voluntary super contributions (up to $50,000 total) to fund a deposit. You can also use super in some financial hardship situations or for compassionate grounds, but the criteria are strict.
What is the government co-contribution?
If you earn under $60,400 in 2025-26 and make personal after-tax contributions to super, the government will match up to $500 per year (50 cents per dollar contributed). It is one of the highest-return investments available to low-income workers - effectively a 50% return on the first $1,000 contributed.
What this calculator doesn't include
- Insurance premiums deducted from your fund - usually $200-$1,000/year depending on cover
- Government co-contribution for lower earners
- Spouse contributions and tax offset for partnered couples
- Carry-forward concessional contributions for people with balances under $500,000
- Transition-to-retirement strategies for those approaching preservation age
- Self-Managed Super Funds (SMSF) rules, which differ significantly from public-offer funds
- Division 293 tax for higher earners (additional 15% on contributions over $250,000 income)
For personalised advice, the federal government's MoneySmart is the only independent source. A licensed financial adviser can run detailed projections for your specific situation.