Example of saving tax

If Judy did not make any contribution, her taxable income (assuming no other deductions) will be $60,000, on which she will pay tax of $8,788 (plus a further $1,200 for the 2% Medicare Levy).

However, when she makes a $20,000 concessional superannuation contribution, her taxable income reduces by $20,000, saving her $5,300 in personal tax (and $400 on the Medicare Levy).

However, the super contribution will attract contributions tax of 15% in the fund, being $3,000. Therefore, the overall net tax saving in this scenario is $2,300 (being $5,300 less $3,000). There is also an additional $400 saving on the Medicare Levy. The balance of the concessional contribution after tax of $17,000 will form part of the taxable component of Judy's super account.