Reducing tax income tax by making personal deductible super contributions

If you are self-employed or most of your income doesn't come from eligible employment then you may be able to use your super contribution as a tax deduction.

So by contributing to super, you not only increase your super but also reduce your income tax bill. Your super will still be taxed at the 15% rate but your income tax will be reduced, which means overall you will benefit from tax savings.

An example of where this might be appropriate:

Susan is a small business owner who would like to invest $10,000 in super this year. She is able to deduct this amount from her taxable income, so reducing it by $10,000.

Susan pays 41.5% tax which means that her tax bill this year will be reduced by $4,150. Her contribution will be taxed at 15%, but she will save $2,650 in tax overall.