Super vs Mortgage: Should You Pay Off Your Home or Boost Super?

This is one of the most common questions in Australia. You have a mortgage. You have super. You have a bit of spare money. Do you smash the mortgage, or do you salary sacrifice and build super faster.

The answer is not a slogan. It depends on four things: your interest rate, your tax rate, how long you have until you can access super, and how much you value flexibility.

What extra mortgage repayments really earn you

If your home loan is 6%, an extra dollar paid into that loan saves you 6% interest each year on that dollar. That saving is guaranteed. There is no market risk. It is also effectively after tax, because you are paying a personal mortgage and the interest is not tax deductible.

If you use an offset account, the maths is similar to an extra repayment. You reduce interest while keeping access to the cash. The bank terms still matter, but it is usually the simplest way to keep flexibility while reducing interest.

What extra super contributions really earn you

Concessional contributions are taxed at 15% inside super, instead of your marginal tax rate. That difference is the immediate benefit. You get it before any investment return even happens.

Here is a simple illustration. This is not advice, it is just showing the mechanism.

Example marginal rate	Contributions tax	Indicative tax difference on $10,000
32% incl Medicare levy	15%	$1,700
39% incl Medicare levy	15%	$2,400
47% incl Medicare levy	15%	$3,200

There are also extra rules. High income earners may pay additional contributions tax under Division 293. Contribution caps apply. Carry forward concessional contributions can apply in some cases. The point here is simple: for many people, super has a meaningful up front tax advantage, then it compounds over time.

Access matters more than people admit

Mortgage repayments improve your position today. Super improves your position later. That sounds obvious, but it is the reason the decision is hard.

Money in super is generally locked away until you meet a condition of release. For most people, that means your preservation age and retirement, or turning 65. Money in an offset account is accessible. Money you have paid into the loan is harder to access unless you have redraw available and the lender allows it.

So you are not only comparing returns. You are comparing liquidity and rules.

Age Pension interactions are real

Your principal home is exempt from the Age Pension assets test. Super is not always exempt. Before Age Pension age, super in accumulation phase is generally not counted under the assets test. Once you reach Age Pension age, super becomes assessable for most people.

This is why two people with the same net worth can have different Age Pension outcomes depending on where the money sits. A dollar inside the home is treated differently from a dollar inside super once you reach Age Pension age.

A simple way to think about it

If your mortgage rate is high, the guaranteed saving from paying it down becomes very attractive. If your marginal tax rate is high, the tax difference on super contributions becomes very attractive. If you are close to being able to access super, the time benefit of super compounding is smaller than it is for someone in their 30s or 40s. If you do not have an emergency buffer, locking money away in super or locking it into the loan can create stress later.

Most people end up in a mixed strategy. They reduce interest using an offset for flexibility, and they make super contributions up to a level that makes sense for their cash flow and caps. The correct mix varies by person. The framework is the same.