Superannuation Calculator 2026-27

How Superannuation Works in Australia

Superannuation, universally known as "super" in Australia, is the nation's compulsory retirement savings system. Introduced in its current form in 1992 under the Keating government's Superannuation Guarantee (SG) legislation, the system requires employers to contribute a percentage of each employee's Ordinary Time Earnings (OTE) into a regulated superannuation fund. These contributions, combined with investment returns compounding over decades of working life, build a retirement balance intended to provide financial security in retirement, supplementing or replacing the government-funded Age Pension.

Australia's superannuation system is one of the largest pools of retirement savings in the world, with total assets exceeding $3.9 trillion as of late 2024. The system is built on several pillars: compulsory employer contributions (the Super Guarantee), voluntary employee contributions (both pre-tax salary sacrifice and after-tax personal contributions), government co-contributions for lower-income earners, and the investment returns generated by fund managers across equities, bonds, property, and alternative asset classes. For most Australian workers, super is their second-largest financial asset after their family home.

The Super Guarantee rate for the 2025-26 financial year is 12% of Ordinary Time Earnings, the final step in a legislated series of increases that began at 9.5% in 2021. At 12%, an employee earning $85 000 per year receives $10 200 in employer super contributions annually, building toward a projected retirement balance that, combined with investment returns, should provide a comfortable standard of living in retirement. The 12% rate will remain in place for subsequent financial years, as no further increases are currently legislated.

Super Guarantee Rate History and the Path to 12%

The SG rate has been on a carefully planned trajectory of increases, rising from 9.5% (where it remained from 2014 to 2021) to the final target of 12% by 1 July 2025. Each annual increase of 0.5 percentage points was designed to be gradual, allowing employers to adjust budgets and workers on total-package arrangements to absorb the small year-on-year reduction in base pay.

The increase from 9.5% to 12% over the full career of a worker is estimated by Treasury to boost the median retirement balance by approximately $100 000, a meaningful improvement in retirement outcomes. For a 30-year-old earning $85 000, the additional 2.5 percentage points of SG (worth $2 125 per year) compounding at 7% annual returns over 30 years to age 60 adds approximately $213 000 to their retirement balance.

Super Inclusive vs Super on Top: The Critical Distinction

Understanding how your employment contract treats superannuation is one of the most important elements of evaluating your compensation. The two main arrangements produce significantly different outcomes for your take-home pay and total package value.

Super on top (base plus super) is the more common arrangement for permanent employees, particularly in the private sector. Your employer pays your stated base salary directly to you and contributes 12% of that amount into your super fund on top. If your contract states a base salary of $100 000, you receive $100 000 in gross pay (before tax) plus $12 000 going to your super fund, for a total employment cost to the employer of $112 000.

Super inclusive (total package or TEC) means the super contribution is included within the stated figure. If your contract states a total package of $100 000, your base salary is calculated by dividing by 1.12, giving approximately $89 286. The remaining $10 714 goes to super. Your take-home pay is calculated on the lower base salary of $89 286, which means less money in your pocket each pay period. This arrangement is common in government roles, some large corporations, and organisations that express remuneration as Total Employment Cost (TEC).

The practical difference on a "$100 000" figure is substantial. Under super-on-top, you receive gross pay of $100 000. Under super-inclusive, you receive gross pay of $89 286. After tax (assuming a resident with no HECS), the super-on-top arrangement yields approximately $77 512 in take-home pay, while the super-inclusive arrangement yields approximately $70 560, a difference of nearly $7 000 per year. When evaluating job offers, always clarify whether the stated figure is base-plus-super or a total package.

Contribution Caps and Tax Treatment for 2025-26

Super contributions are subject to annual caps that limit the amount you can contribute each year. Exceeding these caps triggers additional tax, so understanding the limits is essential for effective super planning.

The $30 000 concessional cap includes all before-tax contributions: your employer's SG (12% of salary), any salary sacrifice amounts, and personal contributions for which you claim a tax deduction. If your employer contributes $12 000 in SG (on a $100 000 salary), you have $18 000 of headroom for additional concessional contributions. Exceeding the cap means the excess is included in your assessable income and taxed at your marginal rate, plus an interest charge based on the fund's earnings rate.

The carry-forward rule allows you to use unused concessional cap amounts from the previous five financial years, provided your total super balance is below $500 000 at the prior 30 June. This is particularly useful for workers who had lower incomes (and thus lower employer SG contributions) in previous years but are now earning more and want to boost their super. For example, if your concessional contributions were $15 000 per year for each of the past three years, you have accumulated $45 000 in unused cap space ($30 000 minus $15 000 = $15 000 per year, times 3 years). You could make a lump-sum salary sacrifice of up to $60 000 (the current year's $30 000 cap plus $30 000 in carry-forward from the two most recent unused years, subject to available five-year history).

Salary Sacrifice into Super: A Powerful Tax Strategy

Salary sacrificing into super is one of the most effective tax minimisation strategies available to Australian workers. By redirecting pre-tax salary into your super fund, you pay 15% contributions tax inside the fund instead of your marginal tax rate (which can be up to 45% plus 2% Medicare Levy). The tax saving is the difference between these two rates, multiplied by the amount sacrificed.

Marginal rate includes 2% Medicare Levy. Division 293 tax (additional 15%) applies if income plus concessional contributions exceeds $250 000, reducing the super tax benefit for very high earners.

The trade-off is that salary sacrificed into super is locked away until you reach your preservation age (60 for anyone born after 30 June 1964). You cannot access it for a house deposit, an emergency, or any other purpose outside the very limited early release conditions. For this reason, salary sacrifice is most appropriate for workers who have already built an adequate emergency fund and do not need the extra cash in the short to medium term.

Maximum Super Contribution Base

For 2025-26, the maximum super contribution base is $65 070 per quarter, or $260 280 per year. Your employer is only legally required to pay the 12% SG on earnings up to this cap. On the maximum base, the quarterly SG contribution is $7 808.40, and the annual obligation is $31 234.

For high-income employees earning above $260 280, the SG contribution is effectively capped. An employee earning $400 000 receives the same $31 234 in compulsory SG as one earning $260 280. Some employers voluntarily contribute SG on the full salary, but this is not required by law. If you are a high earner whose employer only contributes up to the cap, you can make personal deductible contributions to make up the shortfall, subject to the $30 000 concessional cap.

Choosing and Managing Your Super Fund

Since 1 November 2021, employees have the right to choose their super fund under the Your Future, Your Super reforms. If you do not make an active choice, your employer will contribute to a "stapled fund" (a fund that has been linked to you from a previous employer) or, if no stapled fund exists, to the employer's default fund. The ATO's YourSuper comparison tool publishes performance data and fees for all MySuper products, making it easier to compare funds.

Fees and investment performance vary significantly between funds. A difference of just 0.5% in annual fees on a $200 000 balance costs $1 000 per year, and over a 30-year career, this fee difference can reduce your retirement balance by $60 000 to $80 000 due to the compounding effect. Industry super funds have generally outperformed retail funds over the long term, though past performance is not a guarantee of future results. When choosing a fund, consider net returns (returns after fees), insurance offerings, and the quality of the fund's digital tools and customer service.

Super Guarantee on Common Salary Levels

When Can You Access Your Super?

Super is preserved until you reach your preservation age and satisfy a condition of release. For anyone born after 30 June 1964, the preservation age is 60. You can access your super when you retire permanently from the workforce after reaching preservation age, when you turn 65 regardless of work status, or through a Transition to Retirement (TTR) income stream while still working (limited to 10% of your balance per year).

Early access is only permitted in extremely limited circumstances: severe financial hardship (requiring evidence from Services Australia that you have been receiving government income support for at least 26 weeks and are unable to meet reasonable living expenses), compassionate grounds (approved by the ATO for specific purposes such as medical treatment, preventing mortgage foreclosure, or modifying your home for a disability), terminal medical conditions (where two medical practitioners certify you are likely to die within 24 months), and permanent incapacity (where you are unlikely to ever work again in a capacity for which you are reasonably qualified).

Sources

• ATO: Super Guarantee rate
• ATO: Super contribution caps
• ATO: Accessing your super