Updated on 12 December 2023
4 minute read
You want the best chance of living your retirement dreams. So, it pays to know how tax and the timing of your contributions work together. That's where concessional contributions come in. It's a tax-smart way to boost your savings.
Concessional contributions refers to the money that goes into your super fund before it’s taxed. We often call them ‘pre-tax super contributions’ or 'before-tax contributions' for this reason.
They include the payments your employer makes into your superannuation. Because of this, most money added to your super is usually made before tax.
Concessional contributions still get taxed.
The Australian Taxation Office (ATO) taxes them at 15% once they’re in your fund. But that’s usually lower than the tax you pay on your income.
Let's look at the 3 main types of concessional contributions:
Super guarantee (SG) contributions
These are the super payments that employers must make to your fund (if you're eligible). Most workers should get them.
Also called salary packaging, it's a way to add extra to your super on top of the employer SG contribution.
If you pay after-tax money to your super and then claim a tax deduction for it, they become concessional contributions.
Learning the difference between concessional and non-concessional contributions, and the limits around them, helps you make the most of your super account. And it’s all about timing.
These go into your super before tax is taken out.
They're only taxed 15%. So, depending on the rate of tax you pay on your income, they can be a smart way to grow your super balance.
These are voluntary contributions you make after tax. For example, from your bank account or other savings, or regular payments from your after-tax pay.
They’re different from contributions like salary sacrificing because you’ve already paid tax on the money used to make them.
Learn more about after-tax contributions and your contribution limits.
Concessional contributions can be a tax-smart way of building your wealth. And adding to your super before tax may also reduce your personal income tax.
Salary sacrificing is a common way to do this. The benefits are similar to claiming a tax deduction on after-tax contributions.
If your income + super = $45,000 to $250,000 a year, you pay less than your normal tax on money you salary sacrifice. So that’s 15% tax vs up to 47% tax.
When you put aside money from your salary before tax, income tax is only charged on what's left. So, you could avoid paying more tax.
Every dollar counts. And the earlier you start, the more you'll have for life after work.
TIP: Give your super fund your tax file number (TFN). If you don't, the ATO may tax your concessional contributions at a higher rate.
If you want to add money to your super account as a concessional contribution, there are a few ways you can do it.
You'll need to ask your employer to set this up. They'll make the deposits from your pay. But salary sacrifice isn't available to everyone.
If you can't salary sacrifice, think about paying after-tax money to your super. You may be able to then claim a tax deduction on your contributions. This changes them to concessional contributions.
Getting personal financial advice can help you decide what's right for you.
Yes, there’s a limit on how much you can pay into superannuation before tax – the concessional contributions cap. It sets a limit on how much of the lower tax rate you can get.
For 2023–24, the concessional contribution cap is $27,500.
Plus, the carry forward rule means you can use any leftovers from your concessional caps for up to 5 years (if you're eligible). Learn more about super contribution caps.
Some simple ways to help you stay under concessional contributions cap include:
Check your balance and contributions
Use Member Online or our mobile app to check your account.
You can't claim a tax deduction on before-tax (concessional) contributions.
But you can claim a tax deduction for personal/voluntary super contributions made after tax. Like when you add money from your bank account to your super account.
Concessional contributions are payments made into your super before tax.
Non-concessional contributions are payments made after tax.
The limit for concessional contributions is $27,500 for the 2023–24 tax year.
Making extra before-tax contributions can be a smart way to grow your super, but it's not for everyone.
See what concessional contributions could mean for your super and take-home pay.
Use our calculatorAdding extra to super may be a good way to boost your retirement nest egg. Ever wondered how much tax you’ll pay? We’ve broken it down.
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