Super vs Taxable Investment: Where Your Next Dollar Goes
You've maxed out your emergency fund, the mortgage is ticking along, and you've got an extra thousand a month to invest. Should it go into super, or into a regular brokerage account? The answer isn't "super, always" — but it's closer to that than most people realise.
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The Two Buckets
Every dollar you don't spend ends up in one of a few places. Paying down debt is its own conversation. For money you're genuinely investing for the long term, the two main choices for most Australians are:
- Super — tax-favoured, but locked up until preservation age (60 for anyone born after June 1964).
- Taxable — a regular brokerage account in your own name, holding ETFs, shares, or managed funds. Fully accessible, fully taxed at your marginal rate.
Super wins on the maths, nearly every time, because the tax rates are lower at every stage. But taxable has one thing super doesn't: you can actually spend it before you're sixty. That flexibility is worth real money — just usually not as much as people assume.
The Tax Gap, Step by Step
Tax is the reason super wins. Let's walk through a $1,000 pre-tax dollar that Priya, a 40-year-old earning $120,000 in Sydney, is deciding what to do with. Her marginal tax rate is 32%, plus 2% Medicare levy — so 34.5% on the next dollar.
Option A: Take it home, invest in a taxable ETF
Priya pays $345 in tax. That leaves $655 to invest. Over the next 25 years, dividends arrive each year and get taxed at her marginal rate — franking credits help, but not enough to close the gap. When she eventually sells, capital gains tax applies to the growth (halved if held over 12 months, so effectively ~17% on long-term growth).
Option B: Salary sacrifice the $1,000 into super
The full $1,000 goes into her super fund. The fund pays 15% contributions tax ($150), leaving $850 invested — that's $195 more working for her from day one. Inside super, earnings are taxed at 15% in accumulation phase, and 0% once she starts a pension after 60. Capital gains inside super are taxed at 10% if held over a year.
The headline: Super starts with about 30% more capital, then grows in a lower-tax environment for 25 years, then pays out tax-free after 60. The taxable account has to work uphill the whole way.
The 25-Year Comparison
Running Priya's $1,000-per-month scenario over 25 years, with a 7% gross return in both accounts, the gap looks like this:
| Detail | Taxable ETF | Salary Sacrifice to Super |
|---|---|---|
| Pre-tax contribution per month | $1,000 | $1,000 |
| After-tax amount invested | $655 | $850 |
| Effective tax on earnings | ~25% | ~10% |
| Balance at age 65 | ~$430,000 | ~$640,000 |
| After-tax value at 65 | ~$410,000 | ~$640,000 |
Super comes out roughly $230,000 ahead over 25 years on the same pre-tax dollar, because the tax advantages stack. Lower contribution tax, lower earnings tax, and tax-free drawdowns in pension phase all pull in the same direction.
Example: Same Dollar, Different Destination
Year 1: Super has $10,200 invested. Taxable has $7,860. Gap: $2,340.
Year 10: Super is at $145,000. Taxable is at $108,000. Gap: $37,000.
Year 25 (age 65): Super is at $640,000, accessible tax-free. Taxable is at $430,000, with capital gains due on the growth. After-tax gap: about $230,000.
When Taxable Makes Sense Anyway
Super looks unbeatable on the numbers — but there are real reasons to hold money outside it too.
- You need the money before 60. This is the big one. If you're planning to retire early, take a career break, start a business, or buy a bigger home, money locked in super won't help.
- You've hit the concessional cap. The $30,000 per year concessional cap (FY 2024-25) includes employer SG. Going over triggers extra tax. Non-concessional contributions are capped at $120,000 per year.
- You're close to preservation age already. The closer you are, the less the long-term tax advantage matters — but it's still usually a win.
- You want to leave money to non-dependent adult children. Super death benefits to non-dependants cop a 17% tax on the taxable component. A taxable account doesn't.
- Total super balance concerns. If you're approaching the $1.9 million transfer balance cap, extra contributions lose some of their shine.
A Sensible Sequencing
Most Australians don't need to pick one or the other. A common sequencing that balances tax efficiency with flexibility:
- Get the free stuff first — employer SG, plus the government co-contribution if you qualify.
- Build a taxable buffer — enough outside super to cover early retirement, career breaks, or a home upgrade.
- Salary sacrifice to super — especially once your marginal rate hits 32.5% or above, because 15% contributions tax vs 34.5% take-home is a big spread.
- Use catch-up contributions — if your total super balance is under $500,000, you can use unused concessional cap from the last five years.
- Non-concessional top-ups later — for windfalls or post-tax contributions closer to retirement.
The rule of thumb: If you don't need the money before 60, super almost always wins. If you might, keep some portion outside super so Future You has options.
What Talk Through Wealth Shows You
The super-vs-taxable decision looks simple in tax tables and brutal in spreadsheets. Talk Through Wealth turns it into the shape of your own retirement:
- Project both paths side-by-side on the same pre-tax dollar
- Model your actual marginal tax rate, not a textbook example
- See the after-tax value at every age — not just the headline balance
- Test what happens if you want to retire at 55, 60, or 65
- Layer in the concessional cap, catch-up contributions, and employer SG
Once you can see both curves on the same chart, the right split usually picks itself.
See Where Your Next Dollar Should Go
Model super and taxable investing side by side across your full retirement timeline.
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