Concessional vs Non-Concessional Contributions: A Plain-English Guide to Super

Superannuation is one of those areas where the terminology does a good job of making simple ideas sound complicated. "Concessional contributions" and "non-concessional contributions" are a perfect example. The names tell you almost nothing about what they actually mean.

Once you understand the difference, though, it clicks pretty quickly. And understanding it is genuinely useful, because the type of contribution you make determines how it gets taxed, how much you are allowed to put in, and what strategies are available to you.

Let's break it down.

The core difference

The word "concessional" here means tax-concession. A concessional contribution is one that goes into super before income tax is applied. Instead of being taxed at your marginal rate, it gets taxed at a flat 15% when it enters the fund.

A non-concessional contribution is money you contribute from your after-tax income. You have already paid income tax on it, so it goes into super without being taxed again on the way in.

That is the essential difference: before-tax money versus after-tax money.

Concessional contributions

The most common concessional contribution is your employer's Superannuation Guarantee (SG) payment. By law, your employer is required to contribute a percentage of your ordinary time earnings directly into your super. From 1 July 2025, that rate is 12%.

If you are an employee, these contributions happen automatically. You do not do anything. But they count towards your concessional cap.

The other main type of concessional contribution is a salary sacrifice arrangement. This is where you ask your employer to redirect some of your pre-tax salary into super rather than paying it to you as income. Because you are diverting it before it hits your bank account, you pay 15% contributions tax on it instead of your marginal rate.

To make that concrete: if you earn $90,000 and salary sacrifice $10,000 into super, you pay 15% on that $10,000 instead of 34.5% (your 32.5% marginal rate plus the 2% Medicare Levy). That is a tax saving of around $1,950 on a single $10,000 contribution. For people in higher brackets, the saving is larger.

You can also make personal concessional contributions directly into your fund and claim a tax deduction for them at the end of the financial year. To do this, you need to lodge a "Notice of intent to claim a deduction" with your fund before lodging your tax return. This is particularly useful for self-employed people, freelancers, and anyone whose employer does not offer salary sacrifice.

One thing worth knowing for higher earners: if your income exceeds $250,000, an additional 15% tax (known as Division 293) applies to your concessional contributions, bringing the effective rate to 30% rather than 15%. Your fund or the ATO will notify you if this applies.

The concessional cap

For the 2025/26 financial year, the concessional contributions cap is $30,000. This includes your employer's SG contributions, any salary sacrifice, and any personal deductible contributions. If you go over this limit, the excess gets added to your assessable income and taxed at your marginal rate, which wipes out the benefit.

One important mechanism here is the carry-forward rule. If your total super balance was below $500,000 on 30 June of the previous financial year, you may be able to carry forward any unused concessional cap space from the previous five years and use it in a single year. This can be a useful option for people who took time out of the workforce, had periods of lower income, or simply did not max out their contributions in earlier years.

Non-concessional contributions

Non-concessional contributions are made with money you have already paid income tax on. Because the tax has already been paid, these contributions go into super tax-free on entry. Inside the fund, investment earnings are still taxed at 15% (or 10% on capital gains held for over a year), the same as any other super money.

People make non-concessional contributions for different reasons. Sometimes it is a windfall: an inheritance, the proceeds of a property sale, or a business settlement. Sometimes it is a deliberate strategy to build up the super balance faster, particularly for people approaching retirement.

The non-concessional cap

For 2025/26, the non-concessional cap is $120,000 per financial year. However, if you are under 75 and your total super balance is below $1.66 million, you may be able to use the "bring-forward rule" to contribute up to three years' worth of non-concessional contributions in a single year, which means up to $360,000 at once.

If your total super balance is at or above $1.9 million, you cannot make non-concessional contributions at all. The cap reduces progressively as your balance approaches that threshold.

Why the distinction matters

The type of contribution affects your tax outcome both now and in retirement.

The simplest way to think about it: use concessional contributions to reduce your tax bill now; use non-concessional contributions when you have a lump sum you want to move into the low-tax super environment.

Concessional contributions reduce your taxable income in the year you make them. They are taxed going in, but at a lower rate than most people's marginal rate. Non-concessional contributions do not give you an upfront tax benefit, but they add to your super balance without any contribution tax. And once you are in the retirement phase and drawing a pension from your super, that money can be withdrawn tax-free if you are over 60 under a taxed fund.

For most people still in the accumulation phase, maximising concessional contributions first makes sense because of the upfront tax saving. Non-concessional contributions become more relevant when you are trying to move a larger lump sum into the super environment and the concessional cap has already been used.

How FinTarget tracks this

FinTarget's superannuation module lets you record your balance and contributions by financial year, broken down by contribution type. This gives you a running view of where you sit against the caps and how your balance is growing over time, without needing to log in to your fund every time you want a sense of the overall picture.

It is worth keeping an eye on, particularly if you are making salary sacrifice contributions or planning to use the carry-forward or bring-forward rules. The ATO tracks contributions through your fund's reporting, but having your own record means you are not flying blind.

The short version

Concessional contributions are before-tax and include your employer's SG payments, salary sacrifice, and personal contributions you claim as a deduction. They are capped at $30,000 for 2025/26 and taxed at 15% going in (30% if you earn over $250,000).

Non-concessional contributions come from money you have already paid tax on. They are capped at $120,000 for 2025/26 (or up to $360,000 under the bring-forward rule) and have no contribution tax on entry.

Both types have their place depending on your situation. If you are not sure which makes sense for you, it is worth a conversation with a financial adviser or accountant, particularly if you are thinking about larger contributions or using carry-forward provisions.

What is worth doing regardless is keeping track of where your balance sits and what you are contributing each year. Super is a long game, and knowing the numbers makes it a lot easier to play it well.