Superannuation is Australia's compulsory retirement savings system. Your employer must contribute a percentage of your ordinary time earnings — the Super Guarantee — into a super fund of your choice, on top of your salary. This money is invested and grows over your working life, generally locked away until you reach retirement age.
The Super Guarantee rate is 11.5% for 2025-26, the second-to-last step in a long-scheduled series of increases, rising to a final rate of 12% from 1 July 2025. This is calculated on your ordinary time earnings (generally your regular salary, excluding most overtime) and paid by your employer directly into your fund — it does not come out of your take-home pay.
Beyond the compulsory Super Guarantee, you can ask your employer to redirect part of your pre-tax salary into super instead of paying it to you as cash. This is taxed at a flat 15% "contributions tax" inside the fund, rather than your marginal income tax rate — for most earners in the 30%, 37%, or 45% brackets, this represents a significant tax saving compared to receiving the same amount as ordinary salary.
There's a limit on how much can go into super at the concessional (15% tax) rate each year — $30,000 for 2025-26, combining both your employer's Super Guarantee contributions and any salary sacrifice or personal deductible contributions. Contributions above this cap are taxed at your marginal rate instead, removing the tax advantage, so it's worth checking your total contributions before salary sacrificing large amounts.
Employer Super Guarantee: $80,000 × 11.5% = $9,200. Salary sacrifice: $80,000 × 5% = $4,000, taxed at 15% inside the fund ($600) instead of your marginal rate (likely 30%, or $1,200) — a tax saving of $600 per year just from choosing to sacrifice rather than take the same amount as salary. Total annual super contribution: $13,200.
Because super grows tax-effectively over long periods (investment earnings inside super are taxed at just 15%, compared to your marginal rate on other investments), even modest additional contributions made early in your career can compound into a substantial difference by retirement, simply due to the extra decades of growth.