Superannuation rules explained: What you need to know to supercharge your nest egg

It’s important to understand the complex and confusing range of caps, cut-offs and concessions that can affect your super.

It is important to understand the caps, cut-offs and concessions that can affect your super. Artwork: Frank Ling

Superannuation is the best way for people to build nest eggs in a low-tax environment, and eventually pay zero tax once they retire.

To make the most of these benefits, it’s important to understand the complex and confusing range of caps, cut-offs and concessions that can affect your super.

Here are some of the most important caps, what they mean and how to use them to supercharge your retirement savings.

1. Want a tax deduction?

One of the caps offering the biggest benefits is the concessional contributions cap, which is $30,000 annually for all tax-deductible super contributions. These include compulsory employer superannuation guarantee payments, which rose from 11.5 per cent to 12 per cent in July 2025, salary sacrifice, plus any other voluntary contributions you personally make and claim a tax deduction for them.

Concessional contributions going into your super fund are taxed at 15 per cent. It means, if you’re in the top tax bracket and paying 47c in the dollar, you effectively reduce tax payable by 32c in the dollar.

2. Concessional v non-concessional

Concessional contributions go into your super from your before-tax salary. From there, they get taxed at 15 per cent. So, depending on the rate of tax you pay on your income, it can be a smart way to grow your super balance.

But beware, high earners. You will get hit with an additional 15 per cent super contribution tax if your income is above $250,000 a year. In effect, every $1 earnt above $250,000 will be taxed at 30 per cent going into your superannuation account.

Non-concessional contributions are voluntary contributions you make after tax. They can be payments made from wages already paid into your bank account, cash deposits, inheritances or proceeds from asset sales. They can be used to quickly grow a superannuation nest egg.

3. Playing catch-up

For a few years now, people have been allowed to carry forward up to five years of unused concessional contribution cap amounts. This potentially can allow you to pump tens of thousands of dollars of extra cash into super in one year and claim a big tax deduction for it.

However, it too has its own cap: you are only eligible to make these catch-up contributions if your total super balance was below $500,000 at June 30 of the previous financial year.

4. The biggest contributions

While the concessional contribution cap of $30,000 is big, the non-concessional contribution cap is four times as large, at $120,000 a year.

But wait, there’s more. You are allowed to bring forward a couple of future years of non-concessional contributions, so in effect you can make a contribution of $360,000 in total in one year. And if you time your contributions over the course of June and July, you can potentially add $480,000 to your super fund in just a few days.

This is particularly helpful for people who have made a big profit from selling property or have received an inheritance.

5. Pay nothing, get $500

The federal government’s superannuation co-contribution scheme for low- and middle-income earners injects up to $500 into the super of a person who makes up to $1000 of non-concessional contributions into their fund.

In other words, if you put $1000 into your superannuation fund, the government will throw in $500.

But, there are income thresholds. For 2025-26, people can qualify for the full $500 co-contribution if their annual income is below $47,488 and get a partial co-contribution if their income is below $62,488.

You don’t need to apply for this. If your income and contributions make you eligible, the super fund squares it away with the government and you will get your “free” $500.

6. What about caps in retirement?

Once you finish work, the caps don’t finish, and wealthier seniors can face them right up until they die.

The most important cap for retirees is the transfer balance cap, which is a limit on how much money you can transfer into a retirement phase income stream, like a pension, where the earnings and pension payments are tax-free.

It is indexed in line with Consumer Price Index rises and it climbs in $100,000 increments. As of July 1, 2025, the transfer balance cap sits at $2m for new retirees.

In other words, you can transfer up to $2m tax-free. After that, you get taxed at 15 per cent. And then, another controversial cap looms. The government plans to whack a new 15 per cent tax on super fund balances above $3m, effectively doubling the rate to 30 per cent and taxing unrealised capital gains in the process. This means that a farming family, for example, may experience a rise in value of their landholdings held in their superannuation and then have to pay tax on that rise, even if the farm has no income. Critics worry that retirees will have to make forced sales of property and other assets in their super fund just to pay it.