Glossary
Concessional Contributions
Concessional contributions are before-tax super contributions: employer SG, salary sacrifice and deductible personal contributions, taxed at 15% inside the fund instead of your marginal rate. The annual cap is $30,000 for 2024-25 and 2025-26.
What it is
Concessional contributions are super contributions made from before-tax income, and they earn the name because they are taxed concessionally at 15% inside the fund rather than at your marginal rate. The category bundles three things: your employer's 12% superannuation guarantee, any salary sacrifice arrangement, and personal contributions you claim as a tax deduction. On a $100,000 salary, your employer's $12,000 of SG is already a concessional contribution before you add a cent of your own.
Everything in that bucket must fit under the concessional cap: $30,000 a year for 2024-25 and 2025-26 per ato.gov.au. High earners face Division 293 tax, an extra 15% once income plus contributions exceeds $250,000. Unused cap from the last five years can be carried forward if your total super balance was under $500,000 at the previous 30 June. Exceed the cap and the excess is taxed at your marginal rate plus a charge.
Key takeaways
- Concessional contributions include employer SG, salary sacrifice and personal contributions you claim as a deduction.
- They are taxed at 15% inside the fund instead of your marginal rate, which is the entire tax advantage.
- The cap is $30,000 per year for 2024-25 and 2025-26, across all concessional types combined.
- Division 293 adds another 15% tax for incomes above $250,000, taking the total to 30%.
- Unused cap from five prior years carries forward if your super balance was under $500,000 last 30 June.
How it works
The mechanics run in two steps. Your employer pays SG, or you redirect pre-tax salary via sacrifice, or you contribute personal money and later claim a deduction by lodging a notice of intent with your fund. Either way the contribution lands in the fund untaxed by you so far. The fund then deducts 15% contributions tax when the money arrives.
The arbitrage is the spread between 15% and your marginal rate. A worker on $80,000 pays roughly 32% marginal tax including Medicare, so each $1,000 sacrificed costs only about $680 of take-home pay but arrives as $850 invested after contributions tax. That gap per $1,000, repeated across decades and compounded, is the whole point of the arrangement.
The cap polices the generosity. All concessional contributions combined must stay under $30,000 a year, verified through ATO data matching after year end. Carry-forward rules let you use unused cap from up to five prior years if your total super balance was under $500,000 at the previous 30 June. Go over and the excess is taxed at your marginal rate plus an interest charge, which erases the benefit. Division 293 layers an additional 15% on contributions once income tops $250,000.
Why it matters
For most workers this is the only legal tax discount with their name on it. A dollar of salary above $45,000 is taxed at 30 cents or more before Medicare; a dollar sacrificed into super is taxed at 15 cents. On retirement incomes the fund's earnings are also taxed lightly, so the system rewards money parked early and often. The catch is the money is locked until preservation age, so this suits surplus cash, not rent money.
A colleague named Brent (yes, that Brent) spent four years chasing crypto staking yields while on $130,000, paying 39% marginal tax on every extra dollar. His accountant eventually showed him that $10,000 of salary sacrifice saved $2,600 in tax compared with investing after tax. Brent had voluntarily donated around $10,000 of avoidable tax across those four years for the thrill of a chart that went sideways.
The practical play is checking your employer's SG first, then sacrificing into the remaining headroom. On $120,000, SG is $14,400, leaving about $15,600 of cap. Model the trade-off with the concessional contributions calculator and the take home pay calculator, and read the caps and carry-forward rules at ato.gov.au.
Real-world examples
$10,000 salary sacrifice on an $80,000 salary
A worker on $80,000 has employer SG of $9,600, sitting well under the $30,000 cap. Sacrificing $10,000 cuts taxable income to $70,000, saving roughly $3,200 in income tax including Medicare, while the fund pays $1,500 contributions tax on the way in. The net tax saving is about $1,700, and take-home pay falls only around $6,800 for an $8,500 net addition to super. Repeated annually for 15 years at a 7% return, that one habit compounds past $210,000. Model your own salary with the concessional contributions calculator.
Cap maths on $150,000: the $8,000 overage
On $150,000, SG alone is $18,000 of the $30,000 cap. An eager worker sacrificing $20,000 contributes $38,000 total, exceeding the cap by $8,000 unless carry-forward space exists. The ATO adds the excess $8,000 back to taxable income, taxes it at the marginal 39% rate (about $3,120) and applies an excess contributions charge, then lets them release up to 85% of the excess from the fund. The tax saving vaporises and the paperwork metastasises. Caps deserve a spreadsheet, not vibes.
Carry-forward: using $70,000 of cap with a $460,000 balance
A worker with a $460,000 super balance at 30 June 2025 made only $12,000 of concessional contributions in each of the last three years. Unused cap of about $18,000 a year, plus the current $30,000, allows roughly $70,000 of concessional contributions this year without breaching. They receive a $70,000 inheritance and contribute it personally, claiming a deduction with a notice of intent. At a 39% marginal rate the deduction saves roughly $23,800 in tax, against the fund's 15% of about $10,050. Eligibility dies the moment the balance tops $500,000 at a 30 June test date.
Common mistakes
Mistake: Forgetting that employer SG counts toward the same $30,000 cap.
Why it bites you: On $250,000, SG is about $30,000 by itself before any sacrifice. Adding $15,000 of sacrifice creates a $15,000 excess, taxed at your marginal rate plus a charge, unwinding the benefit and generating ATO correspondence nobody wants.
Mistake: Claiming a personal contribution deduction without lodging a notice of intent.
Why it bites you: Without the form, the contribution is treated as non-concessional and the deduction is refused. On a $10,000 contribution that is roughly $3,200 of lost tax saving at a 32% marginal rate, forfeited to one missing form.
Mistake: Salary sacrificing money you actually need to live on.
Why it bites you: Super is locked until preservation age. Brent sacrificed $400 a fortnight, then put $6,000 of car repairs on a 20% credit card when his take-home could not stretch, paying more interest than his entire tax saving.
Mistake: Ignoring the $250,000 Division 293 threshold.
Why it bites you: Cross it and contributions tax rises to 30% on some or all concessional contributions. A worker earning $260,000 can receive a surprise Division 293 assessment of over $2,000, usually payable within 21 days or released from super.
Ivy's take
I spent three hours cross-checking the ATO's cap tables, carry-forward rules and Division 293 thresholds so you don't have to. The system is generous and symmetrical: 15% going in, 15% on earnings, little or no tax coming out. Its only condition is surviving without the money until sixty. That condition filters out Brents.
My take: for anyone above the $45,000 bracket, salary sacrificing into spare cap is the closest thing to free money on offer. On $100,000, every $1,000 sacrificed swaps about 32 cents of tax for 15 cents. I find that arithmetic more exciting than any investment chart Brent has ever shown me. Check your SG, check your balance, then fill the gap. Boring wins.
Related jargon, defined
- Non-concessional contributions
- After-tax super contributions with no deduction, capped separately at $120,000 a year.
- Salary sacrifice
- Pre-tax pay redirected into super by agreement, counting toward the concessional cap.
- Division 293 tax
- An extra 15% contributions tax once income plus concessional contributions exceeds $250,000.
- Carry-forward contributions
- Unused concessional cap from up to five prior years, available if your balance was under $500,000 at the previous 30 June.
- Notice of intent
- The form lodged with your fund to claim a personal contribution as a tax deduction.
- Excess contributions charge
- An interest-style charge applied when concessional contributions breach the annual cap.
Frequently asked questions
What counts as a concessional contribution?+
Employer super guarantee, salary sacrifice, and personal contributions you claim as a tax deduction. All three share the single $30,000 cap for 2024-25 and 2025-26. After-tax contributions are a separate, non-concessional category entirely.
What is the concessional contributions cap?+
It is $30,000 per financial year for 2024-25 and 2025-26, covering all concessional contributions combined. Unused cap can carry forward for five years if your total super balance was under $500,000 at the previous 30 June. Check current figures at ato.gov.au, as caps are indexed over time.
What happens if I exceed the cap?+
The excess is added to your taxable income and taxed at your marginal rate, plus an excess contributions charge. You can elect to release up to 85% of the excess from your fund to cover it. The 15% fund tax already paid is credited back against the bill.
Is salary sacrifice still worth it over $250,000?+
Usually yes, but the discount shrinks because Division 293 lifts contributions tax to 30%. Against a 47% top marginal rate including Medicare, the remaining spread still favours sacrificing within the cap. Run your own numbers before committing to an amount.
Can I claim a tax deduction for my own super contributions?+
Yes, if you lodge a valid notice of intent with your fund before filing your return or rolling over. The contribution then counts as concessional and consumes cap space like any other. Skip the form and the deduction is simply denied.
Disclaimer: This information is general in nature and does not constitute financial or legal advice. Always consult a qualified professional for your specific situation.
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Ivy Sinclair-Wren
Financial Chaos Analyst
Ivy Sinclair-Wren is a Financial Chaos Analyst covering investing, AI, wealth psychology, and the emotional consequences of opening finance apps during market crashes. Based in Melbourne, she specializes in demystifying the Australian tax code and helping users navigate the intersection of spreadsheet logic and human irrationality.