Key takeaways
- Concessional contributions include employer super, salary sacrifice, and personal deductible contributions.
- They are generally taxed at 15% inside the fund, lower than most marginal tax rates.
- There is an annual concessional cap, which is indexed and can change between years.
- Unused cap can sometimes be carried forward if your total super balance is below a threshold.
Concessional contributions are before-tax contributions: money for which someone claims a tax deduction. Because they are taxed at a concessional rate inside the fund rather than at your marginal rate, they are one of the main reasons super is tax-effective.
What counts as concessional
- Employer contributions, including the compulsory super guarantee.
- Salary sacrifice, where you direct part of your pre-tax salary into super.
- Personal deductible contributions, where you contribute personally and claim a deduction (you must lodge a valid notice of intent with the fund).
How they are taxed
Concessional contributions are generally taxed at 15% when they enter the fund. For most people that is well below their marginal tax rate, which is the benefit. Higher-income earners can face an additional tax on concessional contributions (known as Division 293), so the advantage narrows at the top.
The annual cap
There is an annual cap on concessional contributions, set by the government and indexed over time. Going over it means the excess is taxed at your marginal rate, with an offset for the tax already paid, and you can choose to release the excess from super. Because the cap figure changes, check the current amount on the ATO's contribution caps page.
Carry-forward unused cap
If you do not use your full concessional cap in a year, you may be able to carry the unused amount forward for several years and use it later, provided your total super balance is below the relevant threshold at the start of the year. This is useful in a year of higher income, for example after selling an asset. It is a valuable but conditional rule, so it is worth getting advice on timing.
Frequently asked questions
- How are concessional contributions taxed?
- Generally at 15% inside the fund. Higher-income earners may pay an extra 15% (Division 293) on some or all of their concessional contributions, which reduces the benefit at the top end.
- Can I claim a tax deduction for personal super contributions?
- Often yes. Personal contributions you intend to claim as a deduction are concessional, but you must lodge a valid notice of intent with the fund and have it acknowledged before you claim. They count against the concessional cap.
- What is carry-forward of unused concessional cap?
- If you do not use your full concessional cap in a year, you may carry the unused part forward for several years and use it later, provided your total super balance is under the threshold. It can help in a high-income year.
