There are lots of variables to consider here, mainly your income level, age, and mortgage interest rates at the time of your decision.Let’s look at what's best to do with a spare $10,000 in income.

The biggest benefit of using a spare $10,000 in income to pay down your home loan is the guaranteed annual interest savings. The downside is you'll have to pay full tax on that income if you use it in this way.

The biggest benefit of contributing a spare $10,000 in income into superannuation is the substantial tax saving on the way in and the ongoing earnings on your investments, we need to remember that concessional superannuation contributions are taxed at 15% inside of the fund, which is lower than most individual income tax rates.

Case study

Let’s say someone is earning $100,000 per year with a mortgage at 6%. They also have a superannuation fund returning an average of 6% per year over the long term, note 6% is conservative, over the long term your super fund will historically earn 8% on average if you’re are a growth investor.

What happens over a 10 year period of using that spare $10,000 to either pay down the home loan or bump up superannuation this year?

Results

At $100k, your marginal tax rate (in 2025) is 30% + Medicare levy = 32%.

So, your $10k becomes $6,800 off your mortgage after tax or $8,500 invested in super after deducting the 15% tax, i.e., you are $1,700 better off on day 1 in super.

If you save 6% on your $6,800 mortgage reduction over 10 years = $5,378 in interest avoided, tax-free.

If you made 6% on your $8,500 in superannuation and then paid tax on it = $5,155 after tax = $223 worse off in superannuation.

Net effect = $1,477 better off in super.

Outcomes can be different depending on income levels and interest rates, higher interest rates make using the money to pay off your home loan more attractive, lower interest rates make investing the money into superannuation a better option.

People on higher incomes will almost always come out in front by contributing to superannuation. Those earning less than $50,000 would likely be worse off if they put their spare $10,000 into superannuation vs. paying down their property.

It is important to note we are only factoring in the net fiscal result, for some people having less debt outweighs returns, and there is nothing wrong with that. Either way it is interesting to look at the numbers.

For the best advice on real estate or finance, please don’t hesitate to reach out today.