Are your super contributions really working in your favour—or are you unintentionally leaving money on the table?
As a high-earning executive, you will have heard about salary sacrifice and may even be using it already. However, there’s another often-overlooked strategy that can significantly reduce your tax bill: personal deductible contributions.
When you’re juggling major responsibilities—leading teams, driving growth, and making complex decisions—knowing how to optimise your finances can fall by the wayside. Yet, overpaying tax means you’re missing out on valuable opportunities to grow your wealth.
In this article, we’ll identify how you can go beyond standard salary sacrifice, bridging the gap between a decent tax plan and one that truly maximises your earning potential. By uncovering the benefits of personal deductible contributions, you’ll keep more of your hard-earned income where it belongs—invested in your future.
Why Consider Personal Deductible Contributions?
Beyond Salary Sacrifice
Salary sacrifice is a common strategy: a portion of your pre-tax salary goes into super, lowering your taxable income. Personal deductible contributions achieve a similar result, but in reverse. You deposit after-tax funds into your super, then claim a tax deduction at the end of the financial year. This deduction reduces your taxable income, effectively lowering your total tax bill.
High Earners and the $30,000 Cap
For financial years up to 30 June 2025, tax-effective (concessional) contributions, including employer and salary sacrifice contributions, are subject to a $30,000 per annum cap. Although you may assume your employer is contributing enough to hit this limit, some executives don’t realise employers aren’t required to pay super once your income surpasses a certain threshold.
For instance, by 30 June 2025 the maximum compulsory super contributions your employer might pay is set to reach $29,932.50—just shy of the $30,000 cap. If your employer’s contributions don’t actually reach that figure, you may have a gap you can fill with personal deductible contributions—reducing your taxable income along the way.
Taking Advantage of Unused Contributions
Carry-Forward Rules
If your super balance was under $500,000 at the previous 30 June, you could carry forward any unused concessional cap amounts from the past five years. This provides a window to “catch up” on contributions and claim a more substantial tax deduction, significantly lowering your tax for that financial year.
Potential for Meaningful Savings
Working through the legislation and superannuation guidelines, some high-income executives could be eligible to contribute up to nearly $14,000 before 30 June 2025—potentially saving as much as $6,000 in income tax.
- Example: If your super balance was under $500,000 last 30 June, and you haven’t fully utilised your concessional contributions in prior years, you may be able to top up to the limit across those unused years. This not only boosts your retirement savings but also unlocks tangible tax benefits
Don’t Overlook Your Spouse
What if your own remuneration package or employment terms already result in you making the most of your tax effective super contributions each year? Your spouse might be the key. If they have a different level of income or a lower super balance, they may qualify for carry-forward concessional contributions as well. Helping them maximise this potential can significantly improve your household’s overall financial position.
Steps to Harness Personal Deductible Contributions
- Confirm Your Employer Contributions
- Verify how much super your employer pays and whether it’s anywhere near the current cap. This step helps you see if there’s room left under the $30,000 limit.
- Check Your Super Balance
- If your balance was under $500,000 at the previous 30 June, review how many years’ worth of unused contributions might be available.
- Calculate Your Taxable Income
- Estimate your income for the year to determine how much a personal deductible contribution could reduce your taxable amount.
- Submit a Notice of Intent
- Before claiming a personal deduction, you’ll need to lodge a Notice of Intent to Claim with your super fund and wait for an acknowledgement.
- Avoid Over-Contribution Pitfalls
- Keep a close eye on the concessional cap across all your super arrangements. Going over can incur extra tax, negating the benefits
- Keep a close eye on the concessional cap across all your super arrangements. Going over can incur extra tax, negating the benefits
Example Scenario
A senior executive finds out their employer’s contributions are about $25,000 for the year. Despite a healthy salary, they’re well under the $30,000 concessional cap. Additionally, they haven’t fully utilised their concessional contributions in previous years due to a lower-income period. By crunching the numbers, they realise they could make a one-time lump sum of $10,000 as a personal deductible contribution. This reduces their taxable income, saving roughly $5,000 in personal income tax, while also boosting their long-term super balance.
Taking the Next Step
Personal deductible contributions offer high-earning executives a powerful tool to close the gap on super contributions, especially if employer contributions don’t quite hit the cap—or if you’ve got unused contributions from earlier years. The potential savings can be substantial, both immediately in tax reduction and over time through compounding returns within super.
If you’re ready to explore how personal deductible contributions could optimise your tax situation and enhance your retirement funds, contact James Marshall at Executive Strategies at +61 (0) 7 3007 2080 or email contact@executivestrategies.com.au.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth ABN 54 139 889 535 AFSL 357306. This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances.
