Superannuation Concessional Contributions: The Complete Australian Guide

Concessional contributions are before-tax contributions to superannuation - they enter the fund taxed at 15% rather than your marginal income tax rate. This is the core mechanism of super's tax advantage:

• Definition: Any contribution made to super where the contributor claims a tax deduction or where the fund claims a deduction - including employer SG, salary sacrifice, and personal deductible contributions
• Tax at entry - 15% contributions tax: All concessional contributions are taxed at 15% by the fund when received; this replaces the income tax you would otherwise pay at your marginal rate
• Tax saving calculation: At 32.5% marginal rate, contributing $10,000 concessionally saves $1,750 (32.5% − 15% = 17.5%); at 37%, saves $2,200; at 45%, saves $3,000 (before Div 293)
• Annual concessional cap 2024-25: $30,000 per person; ALL concessional contributions from ALL sources count toward this cap - employer SG + salary sacrifice + personal deductible contributions combined
• LISTO for low-income earners: If your income (including concessional contributions) is under $37,000, the ATO automatically pays a Low Income Super Tax Offset (LISTO) of up to $500 directly to your fund - effectively refunding the 15% contributions tax for those in the lowest bracket
• Tax year relevance: Concessional contributions are assessed in the financial year they are received by the fund (not when you instruct them); late June salary sacrifice payments may fall in the next financial year if the fund processes them after 30 June
• Record-keeping: The ATO tracks concessional contributions via fund reporting; your contributions are visible in myATO; always cross-check your fund's annual statement against the cap to avoid accidental excess contributions

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There are four distinct pathways for making concessional contributions to super. Each has different mechanics and is suited to different employment and income situations:

• 1. Employer Superannuation Guarantee (SG): Mandatory 11.5% of ordinary time earnings (2024-25); your employer must pay this to your nominated super fund regardless of your other contributions; this forms the baseline of most Australians' concessional contributions
• 2. Salary sacrifice: An arrangement with your employer to redirect pre-tax salary into super before PAYG withholding is applied; the fund receives the sacrificed amount as a concessional contribution; reduces your taxable income
• 3. Personal concessional contributions (personal deductible): Available to anyone - employed, self-employed, or partially employed; you contribute from your bank account to your super fund, then lodge a Notice of Intent to Claim a Deduction before the annual tax return due date; the fund then treats these as concessional contributions and pays 15% contributions tax
• 4. Employer additional (voluntary employer contributions): Some employers make additional super contributions above SG (common in public sector enterprise agreements and salary packages); these count as concessional if made on a before-tax basis
• Notice of Intent (NOI): For personal concessional contributions, the NOI is a critical administrative step - without it, the contribution is treated as non-concessional (after-tax) and you receive no personal tax deduction; the NOI must be lodged before you lodge your tax return AND before you withdraw or rollover any amount from the fund that year
• Self-employed super: Sole traders and partners who have no employer paying SG can make the full $30,000 concessional contribution personally and deduct it - effectively giving them the same super tax advantage as employees receiving salary sacrifice
• Multiple employers: If you have two employers both paying SG, their combined contributions count toward your $30,000 cap; if two employers together pay more than $30,000 SG, you have excess concessional contributions - which are taxed at your marginal rate minus a 15% offset

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Division 293 is an additional 15% contributions tax applied to concessional contributions for high-income earners - reducing but not eliminating the super tax advantage:

• Div 293 threshold: Applies when your 'income for surcharge purposes' plus concessional contributions exceeds $250,000
• Income for surcharge purposes: Your taxable income plus reportable fringe benefits plus total net investment loss - a broader definition than taxable income; RFBA from salary packaging adds to the Div 293 calculation
• The additional tax: 15% on the lesser of: (a) the amount by which income + contributions exceeds $250,000, or (b) total concessional contributions
• Example: $240,000 taxable income + $30,000 concessional contributions = $270,000; exceeds $250,000 by $20,000; Div 293 = 15% × $20,000 = $3,000 additional tax; total contributions tax on those $20,000 contributions = 30%
• Effective rate at Div 293: Contributions taxed at 30% total vs 45% marginal rate (top bracket); still a 15% tax saving over contributing as income; Div 293 reduces but does not eliminate the super benefit at the highest incomes
• Div 293 assessment timing: The ATO issues a Div 293 assessment (typically in November after the tax return is lodged); you can pay from your bank account or from your super fund (Div 293 debt release); most people have 21 days to choose
• Salary sacrifice strategy at Div 293 income: Still beneficial to salary sacrifice even at $250,000+ - every dollar in super is still taxed at 30% vs 47% at top rate; the saving is 17 cents per dollar (not 30+ cents) - still meaningful for retirement accumulation

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Since 1 July 2019, Australians with super balances under $500,000 can carry forward unused concessional cap amounts and use them in future years - one of the most valuable super catch-up mechanisms available:

• Eligibility: Super balance must have been under $500,000 on 30 June of the prior financial year; unused cap amounts can be carried forward for up to 5 years
• Available carry-forward (2024-25): The ATO tracks unused amounts going back to 2019-20; by 2024-25, a person who never exceeded their cap from 2019-20 onwards could carry forward up to 5 prior years of unused cap (check exact amount in myATO)
• Maximum carry-forward contribution: If you had $27,500 cap in 2019-20 (the cap at that time), $27,500 in 2020-21, $27,500 in 2021-22, $27,500 in 2022-23, and $27,500 in 2023-24 all unused, plus $30,000 current year cap = maximum carry-forward contribution of approximately $147,500 (depending on actual years' caps and any contributions made)
• When carry-forward is most valuable: In a high-income year following lower-income years - selling an investment property, business sale proceeds, redundancy payments, or simply a career salary jump; using carry-forward in the high-income year maximises the tax saving
• Common use cases: Returning from parental leave (lower-income years create unused cap); career change from part-time to full-time; bonus year; inheritance of investment income
• How to access carry-forward: Make personal concessional contributions up to the combined cap (current year + carry-forward) and lodge a Notice of Intent to Claim; the ATO validates against your tracked carry-forward amount; confirm the available amount in myATO before contributing to avoid excess contributions
• HECS income interaction: Additional concessional contributions increase your 'income for HECS purposes' (income + employer SG + additional concessional = total HECS income); check your HECS threshold before making large carry-forward contributions

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Accidentally exceeding the $30,000 concessional cap is more common than expected, particularly for people with multiple employers or changing employment. Here's what happens and how to manage it:

• The excess amount is included in your income: Excess concessional contributions are included in your assessable income for the year - you pay marginal income tax on the excess
• 15% excess offset: To prevent double taxation (the fund already paid 15% contributions tax), you receive a 15% tax offset against your income tax on the excess amount - so the net additional tax is your marginal rate minus 15%
• Example: $5,000 excess concessional contributions at 37% marginal rate: included in income, marginal tax $1,850; 15% offset $750; net additional tax $1,100; worse than if you'd contributed within the cap (15% only) but better than if it had been treated as taxable income with no offset
• Associated earnings charge: The ATO also charges an Excess Concessional Contributions Charge (interest charge on the amount from the start of the income year) - this adds to the cost of excess contributions
• Withdrawal option: You can elect to have up to 85% of the excess amount withdrawn from your super fund to pay the tax liability; if you don't elect to withdraw, the excess stays in super and counts toward the non-concessional contributions cap - which can create further complications
• Prevention: Monitor your total concessional contributions across all sources via myATO throughout the year; if you approach the cap, stop salary sacrifice or reduce personal contributions; be particularly careful in the year you start a new job with different SG arrangements
• Late June payroll timing: If your employer pays SG on 25 June and your salary sacrifice amount processes on 1 July, the two may fall in different financial years - check with payroll in May each year to confirm the allocation timing

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