Superannuation: Your Most Tax-Effective Account
Australia's superannuation system is one of the most generous in the world from a tax perspective. Earnings inside super are taxed at just 15% (versus your marginal rate outside), and in retirement phase they're often tax-free entirely.
Superannuation Guarantee (SG): From 1 July 2025, employers must contribute 11.5% of your ordinary time earnings into your super fund. This rises to 12% from 1 July 2026.
Contribution Types and Limits (2025–26)
| Type | Limit | Tax Treatment |
|------|-------|---------------|
| Concessional (pre-tax: employer SG + salary sacrifice + personal deductible) | $30,000 p.a. | Taxed at 15% on entry (vs your marginal rate) |
| Non-concessional (after-tax) | $120,000 p.a. | No tax on entry; earnings taxed at 15% |
| Bring-forward rule | Up to $360,000 over 3 years | Applies if balance < $1.68M |
Salary sacrifice is the most effective lever for most workers. Every dollar salary-sacrificed into super is taxed at 15% rather than your marginal rate (32.5%, 37%, or 45%). On a $100,000 salary sacrificing an extra $10,000 saves roughly $2,000–$3,000 in tax annually.
Personal deductible contributions — if you're self-employed or have a mix of income sources, you can claim a personal super contribution as a tax deduction up to the $30,000 concessional cap.
Choosing a Super Fund
Your super fund's investment return and fees compound over decades. A 0.5% fee difference on a $250,000 balance costs over $75,000 over 20 years.
| Fund | Balanced Option 10-yr Return (to June 2024) | Annual Fee (on $50K) |
|------|---------------------------------------------|----------------------|
| Hostplus Balanced | 8.0% | ~$270 |
| AustralianSuper Balanced | 8.4% | ~$435 |
| REST Core Strategy | 7.7% | ~$385 |
| Australian Retirement Trust Balanced | 8.2% | ~$325 |
How to compare: Use the ATO YourSuper comparison tool at ato.gov.au. Super funds with high fees and below-median performance are now flagged by the regulator. If your fund fails the annual performance test, consider switching.
ASX ETFs for Your Non-Super Portfolio
Outside super, ASX-listed ETFs offer low-cost access to domestic and global markets. Two workhorses:
Vanguard Australian Shares ETF (VAS) — tracks the ASX 300, expense ratio 0.07%. Covers Australian large, mid, and small caps. Heavy bank and mining weighting (~50% combined).
Vanguard MSCI International Shares ETF (VGS) — tracks developed market equities (US, Europe, Japan), expense ratio 0.18%. No currency hedge, meaning AUD/USD movements affect your return.
A simple two-ETF portfolio of 70% VGS + 30% VAS gives you global diversification while maintaining meaningful Australian exposure. Add Vanguard Australian Fixed Interest ETF (VAF, 0.10%) for a bond allocation.
Franking Credits: A Uniquely Australian Advantage
Australian companies pay corporate tax (30% for large companies) and can pass the tax paid through to shareholders as franking credits (also called imputation credits). When you receive a fully-franked dividend, you also receive a tax credit for the corporate tax already paid.
Example: A $700 fully franked dividend from Commonwealth Bank comes with $300 in franking credits (30/70 grossed up). Your assessable income is $1,000; you receive a $300 credit against your tax bill. If you're in a 32.5% bracket, you pay $325 in tax less $300 credit = only $25 additional tax. Inside super (15% tax rate), the franking credits often generate a refund.
This is why dividend-focused Australian investors often prefer domestic shares over international ones for income portfolios — the effective pre-tax yield on ASX blue chips is significantly higher once franking is factored in.
Negative Gearing: Know the Rules
If you borrow to invest and the interest cost exceeds the investment income, the loss is negatively geared and can be offset against your other income. This is commonly discussed in property but applies equally to shares.
Caution: Negative gearing only makes sense if the capital growth expectation is strong enough to justify the after-tax cost of carrying the loss. As interest rates have risen significantly since 2022, many previously viable gearing strategies now require a careful recalculation.
SMSF: Worth It at $500K+
A Self-Managed Super Fund gives you direct control over your investments — including direct property, unlisted assets, and individual shares. However:
- Annual compliance costs run $2,000–$5,000 (audit, tax return, admin)
- These only become cost-competitive against industry funds at balances above approximately $500,000
- Trustees are personally responsible for compliance
For most Australians under 45 with balances below $300,000, an industry fund with a low-cost investment option (e.g., Hostplus Index Diversified at 0.02% investment fee) is likely to outperform an SMSF on a net-of-cost basis.
Upload your portfolio to /analyze and get an instant snapshot of your allocation across super and non-super assets, your fee exposure, and the actions most likely to improve your long-term outcome.