Mortgage vs super at a glance
| Factor | Mortgage repayments | Super (salary sacrifice) | Offset account |
|---|---|---|---|
| Return type | Guaranteed at your mortgage rate | Expected but variable | Guaranteed at your mortgage rate |
| Tax treatment | After-tax dollars | Pre-tax; 15% inside super | After-tax dollars |
| Access before 60 | Redraw usually available | Locked until preservation age | Fully accessible |
| Age Pension assets test | Home is exempt | Assessable | Assessable |
| Debt freedom value | High | Zero | Similar interest saving but debt remains |
| Best for | Close to retirement, lower incomes, risk-averse | Higher incomes, longer time horizon | Middle path, emergency buffer |
The right split between these three usually depends on your income, your interest rate, how far you are from retirement, and your appetite for market volatility. Below is how each factor stacks up.
The tax case for super under 2026-27 rates
On a pure spreadsheet basis, super typically wins for anyone on a decent income under Australia’s 2026-27 tax rates. Here is why.
When you make an extra mortgage repayment, you use after-tax dollars. If you earn $100,000 and want to put $10,000 extra toward your home loan, you have already paid income tax on that money. At $100,000, your marginal rate is 30% plus the 2% Medicare levy, or 32% effective marginal. You are paying down debt with money that has already been taxed.
When you salary sacrifice into super, that same $10,000 goes in before tax. It is taxed at 15% inside the fund instead of your marginal rate. The comparison at $100,000 income looks like this:
| Option | Cost to you | What you end up with |
|---|---|---|
| Take $10,000 as salary, pay to mortgage | Full $10,000 after tax | $6,800 in hand ($10,000 minus 32% tax) applied to mortgage |
| Salary sacrifice $10,000 to super | Same pre-tax $10,000 (foregone salary) | $8,500 in super ($10,000 minus 15% contribution tax) |
Salary sacrificing puts $8,500 to work in super for the same reduction in take-home pay that would only give you $6,800 to apply against the mortgage. That is roughly 25% more capital working for you, before you consider investment returns inside super.
That gap compounds over years, particularly for higher income earners. At $135,000 or above, where the 37% marginal bracket starts (39% with Medicare), the tax saving on salary sacrifice widens further.
The 2026-27 concessional contributions cap is $32,500 per year, up from $30,000 in 2025-26. This cap includes your employer’s Superannuation Guarantee (12% since 1 July 2025). If your employer pays $10,800 in SG (12% of a $90,000 salary), you have $21,700 of concessional cap remaining for salary sacrifice.
For anyone whose total super balance is under $500,000, unused concessional cap space from the previous five years can also be used as catch-up contributions on top of the annual cap. This can be a meaningful lever for people who have been under-contributing during career breaks, business years with lower income, or the mortgage-heavy years.
Scott and Phil walked through the mortgage-versus-super trade-off in Episode 5 of the Wealthlab Podcast: Should You Pay Off Your Mortgage With Super at 60?. The spreadsheet answer often points to keeping super for the tax saving, but as Phil put it on the episode: “Financial planning is a funny thing. You’ve got one answer on a spreadsheet, but you’ve got the other answer that takes into account living, breathing people with emotions.”
The certainty case for the mortgage
The case for paying down the mortgage is simpler than most people think: it is a guaranteed return.
If your mortgage rate is 6%, every extra dollar you put on the loan saves you 6% interest. That is a certain, risk-free, after-tax return. Super returns are not guaranteed. A balanced or growth fund averaging 6 to 8% per annum long-term is reasonable to expect, but those returns come with volatility. A bad market year or two just before retirement can hit your super balance in a way that mortgage repayments never can.
The closer you are to retirement, the more that matters. A 58-year-old with a $150,000 mortgage balance and 8 years remaining on the loan sits in a very different position to a 42-year-old with a $450,000 mortgage and 22 years to go. For the person close to retirement, the certainty of being debt-free by 60 or 62 may be worth more than the theoretical super advantage.
There is also an access issue that spreadsheet-based calculators generally ignore. Money contributed to super at 48 is locked away until you meet a condition of release, typically 60. Money in a mortgage offset or redraw remains accessible. That liquidity matters, particularly for anyone with school-age children, variable income, or the risk of an unexpected major expense.
Scott and Phil talked about the reality of retirement-age debt in Episode 19 of the podcast, Is Early Retirement a Trap?, including the finding that around 40% of Australians in their late 50s still carry mortgage debt heading into retirement. For anyone in that group, the mortgage side of this decision is not abstract.
The Age Pension factor most guides miss
Here is the point that generic mortgage-versus-super calculators almost never include, and it can materially change the answer.
Your family home is completely exempt from the Age Pension assets test, regardless of its market value. Super is not.
This means that money sitting inside super at 67 is assessed by Centrelink under both the assets test and the income test (via deeming). Money you have used to pay off your home sits inside an exempt asset.
For some Australians, particularly those with moderate super balances that sit near the Age Pension thresholds, having more home equity and less super can genuinely increase Age Pension entitlement. The extra pension income over 20 to 30 years of retirement can more than offset the lower super balance.
Here is a simplified example, using March 2026 Age Pension thresholds. Consider a single homeowner aged 67 with $500,000 in super and no mortgage. That balance sits above the $321,500 full pension threshold and reduces their pension by roughly $3 per fortnight per $1,000 over the threshold, or approximately $535 per fortnight in pension reduction. If they had instead paid an extra $100,000 off their mortgage during their working years and arrived at 67 with $400,000 in super and no mortgage, the pension reduction would drop by around $150 per fortnight, meaning they would receive around $3,900 more Age Pension per year.
Over a 20-year retirement, that difference alone is around $78,000 (indexed) in extra Age Pension income. The question is whether that outweighs the compounding tax saving of putting the same money into super during the earlier working years. For balances near the threshold, it often does.
Phil and Dan walked through the specific mechanics of the assets test and income test using real case studies in Episode 10 of the Wealthlab Podcast: How the Age Pension Really Works. For anyone within 10 years of retirement still carrying a mortgage, this is worth understanding properly before deciding.
A framework by life stage
Rather than one universal answer, the right split usually depends on where you are in your working life.
In your 30s and early 40s with a large mortgage
Super is generally the stronger use of extra money for higher-income earners, because the 30% marginal tax bracket now starts at $45,000 (Stage 3 rates from 1 July 2024) and salary sacrifice saves you 15% on the way in. You also have 20+ years of compounding ahead. If you are stretched with a large loan, young children, and no emergency buffer, an offset account often makes better sense than either extra repayments or super, because it saves interest at your mortgage rate while keeping the cash accessible.
In your mid to late 40s
This is often the sweet spot for balancing both. The mortgage balance is typically smaller, income is often at or near its peak, and school-age costs are winding down. Maximising the $32,500 concessional cap (from 1 July 2026) while making standard mortgage repayments generally works well here. If you have been under-contributing in previous years and your total super balance is under $500,000, catch-up concessional contributions can put a meaningful lump sum into super in a single financial year while still chipping away at the mortgage.
In your 50s with retirement in sight
The calculus changes. Two things become more important: being debt-free before you stop earning, and understanding how your assets will interact with the Age Pension. Many Australians in this position are well served by a specific split: use salary sacrifice to fill the concessional cap for the tax saving, and direct other extra cash toward clearing the mortgage before retirement. The goal is usually entering retirement with no debt and a meaningful super balance, rather than sacrificing one entirely for the other.
Debt recycling is another option worth understanding at this stage, though it is more complex and higher-risk. Scott and Phil covered debt recycling and its practical mechanics in Episode 3 of the podcast: Can Borrowing More Help You Pay Off Your Home Sooner?. The strategy involves converting non-deductible home loan debt into deductible investment debt, and while it can work well for the right person in the right circumstances, it also carries market and interest rate risk. Not a small decision.
At 60 with a mortgage remaining
At 60, you can access super and the emotional side of debt freedom often carries real weight. Scott put it directly on Episode 5: “I take the opposite perspective. I like to see people have a little bit of juice in the tank.”
The spreadsheet might say keep super earning 6 to 8% while the mortgage sits at 5 to 6%. But walking into retirement with a $200,000 debt on a fixed income is a genuinely different kind of stress. For many people, the emotional value of being debt-free at 60 is worth the theoretical foregone return. If paying off the mortgage at 60 means drawing from super to do it, that needs careful modelling to avoid unintended tax consequences or Age Pension impacts. But it is a legitimate choice, not a bad one.
The offset account: the middle path most people underrate
An offset account attached to your mortgage saves you interest at your full mortgage rate, just like an extra repayment. But the money stays accessible.
For Australians in their 40s who want the interest saving of paying down the mortgage but are cautious about locking cash away, a well-funded offset can be an effective middle path. It is not as tax-efficient as salary sacrifice into super for higher earners, but it saves interest daily, remains flexible, and provides a genuine emergency buffer.
Common patterns we see work well:
- Offset for the accessible emergency buffer (3 to 6 months of expenses)
- Salary sacrifice up to the concessional cap for the tax saving on additional savings
- Extra mortgage repayments only after the emergency buffer and salary sacrifice cap are in place, for those still wanting to accelerate loan payoff
The specific split depends on income, mortgage rate, life stage, and appetite for market volatility.
Where next in our retirement guides
- How Retirement Works in Australia for the three-pillar retirement income system
- Superannuation strategies for accumulation and pension phase planning
- Pension and Centrelink planning for Age Pension optimisation
- The Biggest Expenses in Retirement for what retirement actually costs
Want to see how your numbers play out? Try the free Wealthlab super calculator to model how your balance, contributions, drawdowns and Age Pension interact.
Frequently asked questions
Is it better to pay off my mortgage or contribute extra to super?
For higher income earners (typically above $60,000), salary sacrifice into super usually wins mathematically because of the tax saving on concessional contributions. For people close to retirement, on lower marginal tax rates, or with mortgage rates close to expected super returns, extra mortgage repayments can be the stronger option. The Age Pension interaction also matters: your home is exempt from Centrelink’s assets test, but super is not, which can shift the answer for balances near the pension thresholds.
What is the concessional contributions cap for 2026-27?
The concessional contributions cap for the 2026-27 financial year is $32,500, up from $30,000 in 2025-26. This cap includes your employer’s Superannuation Guarantee (12% since 1 July 2025). If your employer pays $10,800 SG (12% of a $90,000 salary), you have $21,700 of concessional cap remaining for salary sacrifice.
Source: ATO Concessional Contributions Cap. Current as at July 2026.
At what age should super take priority over the mortgage?
There is no universal age, but the mid-40s to late 40s is generally when super begins to make more sense as the primary priority, because the mortgage is smaller, retirement is closer, and the super lock-in period is less of a concern. In your 50s, the pattern that generally works is to do both: use salary sacrifice for the concessional cap, and direct remaining extra cash to clearing the mortgage before retirement.
Can I use my super to pay off my mortgage?
Yes, once you meet a condition of release. This is typically at age 60 after retiring from a job, at 65 regardless of employment, or via a transition to retirement pension. Withdrawals from a taxed super fund after age 60 are tax-free. However, drawing super specifically to pay off a mortgage at or near retirement warrants careful planning, because it can shift Age Pension eligibility depending on timing and asset composition.
Does an offset account count as paying off the mortgage?
Not technically, but it achieves an equivalent interest saving. Every dollar in an offset account reduces the loan balance on which interest is calculated, saving you interest at your mortgage rate. Unlike an extra repayment, the money stays fully accessible. For those who want the interest saving without locking cash away, an offset is often the best of both options.
Does paying off my mortgage help my Age Pension?
It can, for balances near the pension thresholds. Your principal home is completely exempt from the Centrelink assets test regardless of its value. Super, once you reach Age Pension age, is assessed under both the assets and income tests. For Australians near the assets test thresholds, having more equity in a paid-off home and less in super can materially increase their Age Pension entitlement. This is one of the most overlooked factors in the mortgage-versus-super debate.
What’s my marginal tax rate at $100,000 income in 2026-27?
At $100,000 taxable income, your marginal rate is 30% (income above $45,000 sits in the 30% bracket under Stage 3) plus the 2% Medicare levy, for an effective marginal rate of 32%. This is the rate on your next dollar of income. Your effective (average) tax rate is lower, at around 22 to 23%, because the tax-free threshold and 15% bracket apply to your first $45,000.
Can I use catch-up concessional contributions on top of the $32,500 cap?
Yes, if your total super balance was under $500,000 on 30 June of the previous financial year. Catch-up (carry-forward) concessional contributions let you use unused concessional cap space from the past five financial years on top of the current year’s cap, potentially allowing a much larger tax-deductible contribution in a single year. This is a useful lever for those with lumpy incomes, career breaks, or a year of higher-than-usual income.
Should I pay off my mortgage before I retire?
For most Australians, entering retirement without a mortgage is a sensible goal because it removes debt servicing from a fixed retirement income. Around 40% of Australians in their late 50s still carry mortgage debt, so it is a common problem, not an unusual one. The strategy that generally works is to project your mortgage payoff date against your intended retirement date and reverse-engineer the extra repayments needed, while still meeting your concessional cap.
What is debt recycling and should I consider it?
Debt recycling is a strategy that converts non-deductible home loan debt into deductible investment debt over time, potentially accelerating both wealth building and mortgage payoff. It works by drawing equity from a paid-down home loan to invest in income-producing assets, with the interest on that portion becoming tax-deductible. It can be effective for higher-income earners with stable income and moderate risk tolerance, but it carries market risk, interest rate risk, and complexity. Scott and Phil covered the mechanics in Episode 3 of the Wealthlab Podcast. Not a decision to make casually.
Your next step
The right answer to mortgage-versus-super is genuinely different for each household, and it depends on your income, mortgage balance, super balance, distance from retirement, and whether your partner has their own super and income. Anyone offering a universal answer without knowing those specifics is offering a generic view, not real advice.
If you want to talk through how this decision plays out for your specific situation, book a free chat with the Wealthlab team. No jargon, no pressure.
Not ready for a call? Take the free Wealthlab retirement quiz for a general snapshot of where you stand.
