Mortgage, extra super, or shares?
The classic Australian money question. Because super is taxed at just 15% going in, the right answer depends on your tax rate, your time horizon and how soon you need the money — so let's run the numbers.
= $8,160/yr after tax in hand
Extra super
$390,695 — about $90,525 more than the next best option.
Extra super
$390,695
from $204,000 invested
Salary-sacrificed — taxed at just 15% going in, but locked until 60.
Pay off mortgage
$300,170
from $163,200 invested
A guaranteed, risk-free, tax-free return equal to your loan rate.
Invest in ETFs
$288,801
from $163,200 invested
Stays fully accessible; taxed on dividends, plus CGT when you sell.
Nominal returns; same pre-tax income compared each way. Super assumes salary sacrifice within the $32,500 concessional cap and access from 60. ETFs assume the 50% CGT discount and ignore franking credits (which would help them a little). Paying down a mortgage assumes the balance absorbs the extra. A guide, not financial advice.
Once the emergency fund is there and the credit card is clear, most Australian households hit the same fork. The spare few hundred a month can go against the home loan, into super as salary sacrifice, or into ETFs. All three are sensible; they are simply taxed very differently.
This page follows one slab of pre-tax income down all three paths over a horizon you choose, and reports which leaves the most after tax — including the tax to get the money out. The highest finisher is often the one you cannot touch for decades.
How this is calculated
- 1
Find the tax that money would otherwise pay
Your salary is matched to the top resident bracket it reaches for 2026-27, plus the 2% Medicare levy above the low-income threshold. Over the $250,000 Division 293 threshold, super's contributions tax is 30%, not 15%.
- 2
Split the same pre-tax amount three ways
The monthly figure is annualised. Into super it arrives less contributions tax; as cash for the mortgage or ETFs it arrives less your marginal rate — a head start before any growth.
- 3
Grow each pot under its own tax rules
Super compounds at your super return less the 15% earnings tax in accumulation. The mortgage compounds at your loan rate untaxed. ETFs compound at your return less a dividend yield, 3.5% by default, taxed at your marginal rate.
- 4
Charge the exit tax
Super is left whole, because withdrawals from 60 are tax-free, and the mortgage has nothing left to tax. The ETF balance loses capital gains tax on the gain at your marginal rate, with the 50% discount.
- 5
Rank them, then try to break the result
The end balances are ranked with the gap to second. The deep dive re-runs it year by year, sweeps loan rate against ETF return, and finds the return each runner-up needs to catch up.
What it assumes
- Contributions arrive once at year end and grow at a steady rate, so the smooth curve overstates how certain the super and ETF figures are.
- Returns are nominal unless you switch the deep dive to today's dollars, which discounts the display only and never changes who wins.
- Your marginal rate is held flat throughout. The model does not age you into retirement, or allow for a pay rise or a move to part-time work.
- Extra super is assumed to fit under the $32,500 concessional cap for 2026-27, which your employer's 12% Super Guarantee also counts towards. Above the cap the advantage disappears.
- Franking credits, brokerage and fund fees are ignored, and the ETF leg applies today's 50% CGT discount across the whole horizon, though it is legislated to be replaced from 1 July 2027.
- The mortgage leg assumes your loan absorbs the extra at the rate entered.
Common questions
Is paying down the mortgage as good as an investment returning the same rate?
In one way it is better: guaranteed, already after tax and fees, and it cannot have a bad decade. Matching a loan rate with a taxable investment means earning meaningfully more before tax. You give up liquidity.
Does money in an offset account count as paying down the loan?
For this comparison, near enough. An offset cuts interest on the same loan at the same rate, the saving is not taxable income, and the money stays available. The differences are practical: package fees, and self-discipline.
I'm in my thirties. Does super's lock-up make it the wrong answer?
That is the real trade-off, and the model cannot weigh it. Super wins for higher earners over long horizons precisely because it is untouchable until preservation age, 60 for anyone retiring now. If the money is meant for a deposit, the highest finisher is not your answer.
Does salary sacrificing into super reduce my HECS/HELP repayment?
No. Sacrificed amounts are reportable employer super contributions, added back when your repayment income is worked out; the Medicare levy surcharge works the same way. The saving modelled here is income tax only.
The gap between first and second looks small. Does the winner matter?
Treat a narrow gap as a tie and decide on other grounds — how soon you need the money, how you would handle a sharp market fall. If a one-point move in your loan rate flips the grid, splitting is reasonable.
Sources: ATO — tax rates for Australian residents · ATO — key superannuation rates and thresholds · ATO — Medicare levy · Treasury Laws Amendment (Tax Reform No. 1) Act 2026 · All data sources
See also: Salary sacrifice · Mortgage repayments · Property vs shares · Capital gains tax
General information only, not financial advice. Figures are estimates based on the inputs and assumptions above and don't account for your personal circumstances. Confirm anything important with the relevant authority or a licensed adviser.