Understanding Super Contributions: Concessional vs Non-Concessional

Superannuation, or “super,” is a vital part of your retirement savings plan. In Australia, the government encourages you to save for retirement through your super fund, and one of the best ways to build up your balance is by making super contributions. But what does that actually mean? Let’s break it down, focusing on the two main types of superannuation contributions: concessional (before tax) and non-concessional (after tax).

What Are Superannuation Contributions?

Superannuation contributions are the money that you or your employer put into your super fund to help you save for retirement. Contributions can come from a variety of sources, but they fall mainly into two categories: concessional and non-concessional.

What are Concessional Contributions?

Concessional contributions are contributions made before tax is deducted, often referred to as “before-tax” or “tax-deductible” contributions. These contributions can be made by your employer (as part of your regular salary) or by you (through salary sacrifice arrangements or personal contributions for which you claim a tax deduction).

Because concessional contributions are made before tax, they’re taxed at a lower rate of 15% (which is generally lower than most people’s marginal tax rate). This is why these contributions are called “concessional” – they offer a tax break.

Examples of Concessional Contributions.

Some examples of concessional contributions include:

• Employer Super Guarantee Contributions: The mandatory super contribution that your employer pays on your behalf  (currently 11.5% of your salary, and as of 1 July 2025, moving to 12%).
• Salary Sacrifice: Contributions that you choose to make from your pre-tax salary.
• Personal Contributions: If you’re self-employed or want to add to your super, you can contribute personally and claim a tax deduction on those contributions.

Concessional Contribution Caps.

There is a limit to how much you can contribute to your super as concessional contributions in any financial year. It’s important to keep track of your concessional contributions so you don’t exceed these contribution caps. If you exceed this cap, you’ll be taxed at a higher rate on the excess amount.

• From 1 July 2024, the concessional contributions cap is $30,000.
• For the period 1 July 2021 to 30 June 2024, concessional contributions were capped at $27,500 for each year.

What are Non-Concessional Contributions?

Non-concessional contributions are super contributions made from your after-tax income — meaning you’ve already paid income tax on the money before contributing it to your super. Non-concessional contributions can be handy if you’ve already reached your concessional cap or want to top up super from personal savings.

While these non-concessional contributions don’t give you a tax deduction, they can still offer valuable long-term benefits. Namely, once your money is in super, it generally benefits from a lower tax environment.

In the accumulation phase, investment earnings inside your super fund are taxed at a maximum rate of 15% on income and 10% on capital gains (if the asset is held for more than 12 months). This is often significantly lower than your marginal tax rate.

Later, when you move into the pension phase, and subject to meeting eligibility rules, investment earnings on your retirement balance may become tax-free — giving your savings even more room to grow.

Examples of Non-Concessional Contributions.

Examples of non-concessional contributions include:

• Personal Contributions: If you’re earning income and have already paid tax on it, you can add some of it to your super as a non-concessional contribution.
• Spouse Contributions: If your partner earns a lower income, you may choose to contribute to their super, and this counts as a non-concessional contribution.

Non-Concessional Contribution Caps.

Like concessional contributions, it’s also important to keep track of your non-concessional contributions to avoid paying unnecessary tax. Non-concessional contributions are not taxed unless you exceed the cap.

• From 1 July 2024, the non-concessional contributions cap is $120,000.
• For the period 1 July 2021 to 30 June 2024, the cap for non-concessional contributions was $110,000 per financial year.

Carrying Forward or Bringing It Forward?

Depending on your circumstances, you may be able to contribute more to super than the standard annual caps allow, thanks to special rules around unused contributions.

For concessional (before-tax) contributions, you may be able to “carry forward” any unused cap amounts from previous years and use them in future years, which can be helpful if you’ve had irregular income or taken time out of work.

Similarly, for non-concessional (after-tax) contributions, the “bring-forward” arrangement allows you to make larger contributions in a single year by drawing on future caps.

These rules can offer flexibility, but they’re subject to a range of conditions and eligibility criteria – so it’s a good idea to get advice before acting.

Key Differences Between Concessional and Non-Concessional Super Contributions.

Concessional (before-tax) Contributions:

• Tax Treatment on Entry – Taxed at 15% (if within the cap)
• Tax Deductions – Yes (you can claim a tax deduction)
• Contribution Cap – $30,000 per year (from 1 July 2024)
• Ideal For – Reducing your taxable income now, growing your super at a lower tax rate

Non-Concessional (after-tax) Contributions:

• Tax Treatment on Entry – No tax on entry (after-tax money)
• Tax Deductions –  No (you cannot claim a tax deduction)
• Contribution Cap –  $120,000 per year (or up to $360,000 with bring-forward)
• Ideal For – Increasing your super balance using after-tax savings

Why Make Super Contributions?

Making super contributions, whether concessional or non-concessional, is one of the best ways to secure your financial future.

Super funds benefit from low tax rates on earnings and have compounding returns, meaning your money grows faster over time. 

Additionally, the government offers a range of superannuation incentives, namely tax advantages, to encourage Australians to actively save for retirement.

How to Get Started?

If you’re unsure about how much to contribute or which type of contribution is best for your situation, we’re here to help.

Like all things finance, the devil is in the details. So be sure to speak to your financial adviser before making a contribution. They can help you determine how best to contribute to and grow your super based on your financial goals, tax situation, lifestyle and retirement plans.