Concessional vs Non-Concessional Contributions

There are two main types of voluntary super contributions: concessional (before-tax) and non-concessional (after-tax). Each has different tax treatment, different caps, and suits different situations.

This scenario provides general information only and is not personal financial advice. Consider consulting a licensed financial adviser for advice tailored to your situation.

How each contribution type is taxed

Concessional contributions

Before-tax
  • Reduces your taxable income (tax deduction)
  • Taxed at 15% in the super fund
  • Cap: $30,000 per year
  • Includes employer SG, salary sacrifice, personal deductible contributions
Your income → -15% in fund → Super balance

Non-concessional contributions

After-tax
  • No tax deduction (already taxed as income)
  • No contributions tax in the fund
  • Cap: $120,000 per year
  • Includes personal after-tax contributions, spouse contributions
Your income → Pay income tax → 0% in fund → Super balance

Example: $10,000 contribution at 30% marginal rate

Concessional

Before-tax

Gross amount
$10,000
Income tax saved
$3,200 (32%)
Contributions tax (15%)
($1,500)
Net benefit vs taking as salary
$1,700 saved
Added to super
$8,500

Non-concessional

After-tax

Gross amount (after income tax)
$10,000
Income tax already paid
$0 (from after-tax funds)
Contributions tax
$0
Net cost to contribute $10k
$10,000 cash outlay
Added to super
$10,000
Key insight: Concessional contributions are more tax-efficient if you have unused cap space—the tax saving comes from paying 15% instead of your marginal rate. Non-concessional contributions let you add more to super when you've already maxed your concessional cap or have after-tax money to invest.

Contribution caps for 2025-26

Concessional cap

$30,000

Per financial year. Unused amounts can be carried forward for 5 years if your total super balance is under $500,000.

Non-concessional cap

$120,000

Per financial year. Can bring forward up to 3 years ($360,000) if under 75 and total super balance allows.

Total super balance limit

$1.9m

If your total super balance is $1.9 million or more, you cannot make non-concessional contributions.

When one may be preferable to the other

Concessional may be better when:

  • You're on a marginal rate higher than 15% (most people)
  • You have unused cap space available
  • You want to reduce this year's taxable income
  • You're receiving regular employment income

Non-concessional may be better when:

  • You've already maxed your concessional cap
  • You have a lump sum (inheritance, property sale, redundancy)
  • Your marginal rate is very low (e.g., part-year income)
  • You want to boost super without affecting taxable income
  • You're making a spouse contribution

Why exceeding caps can be costly

Exceeding the concessional cap ($30,000)

Excess is added to your assessable income and taxed at your marginal rate. You receive a 15% offset for contributions tax already paid, but effectively lose the concessional rate benefit on the excess.

Exceeding the non-concessional cap ($120,000)

Excess is taxed at 47% (top marginal rate plus Medicare levy) unless you elect to release it from your fund. This is one of the harshest penalties in the super system—always check your cap before making large after-tax contributions.

Common misconceptions

"Non-concessional contributions are tax-free"

They're free of contributions tax, but the money you use to make them has already been taxed as income. The benefit is that they grow tax-free in super—but there's no immediate tax deduction like concessional contributions.

"I should max out non-concessional first because the cap is higher"

Generally, concessional contributions provide a better immediate tax benefit because of the deduction. Non-concessional is typically for "extra" contributions after you've used your concessional cap, or for specific situations like investing an inheritance.

"Salary sacrifice is the only way to make concessional contributions"

Since 2017, you can make personal contributions and claim them as a tax deduction (personal deductible contributions). This gives you similar benefits to salary sacrifice and is useful for self-employed people or those who want flexibility.

"My super fund will stop me if I exceed the cap"

Super funds accept contributions up to your fund's limits, but they don't track your total contributions across all funds or warn you about the ATO caps. You're responsible for monitoring your own contributions against the caps.

FAQ

What is the difference between concessional and non-concessional contributions?

Concessional contributions are made from pre-tax income and taxed at 15% in the super fund. Non-concessional contributions are made from after-tax income and are not taxed again when they enter the fund. The key trade-off is an upfront tax deduction versus no contributions tax.

What is the non-concessional contributions cap for 2025-26?

The non-concessional contributions cap is $120,000 per year for 2025-26. If you're under 75, you may be able to bring forward up to three years' caps ($360,000) in one year, subject to your total super balance.

When are non-concessional contributions better than concessional?

Non-concessional contributions may be better when you've already maximised your concessional cap, you have a lump sum from an inheritance or asset sale, your marginal tax rate is low (making the 15% contributions tax less beneficial), or you want to boost super without affecting your taxable income.

What happens if I exceed the non-concessional cap?

Excess non-concessional contributions are taxed at the top marginal rate (45% plus Medicare levy) unless you elect to release the excess from your super fund. You'll receive a determination from the ATO if you exceed the cap, giving you the option to withdraw the excess.

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