What Are Concessional Super Contributions?

In this article:

Concessional contributions are contributions made to superannuation before tax. Concessional contributions typically arise from employer superannuation guarantee (SG) contributions and salary sacrifice arrangements. Self-employed people can also make concessional contributions to super, for which they can claim a tax deduction.

For example, John earns $100,000 and his employer pays an additional 10% ($10,000) of his wage to his superannuation fund. John is not personally taxed on the extra $10,000, but the government will tax the contributions going into his superannuation fund at a reduced amount (e.g. 15%).

They are called ‘concessional’ contributions because the contributions are made directly to superannuation before the employee receives their net pay and they attract a ‘concessional’ rate of tax going into the fund.

For example, John might have a 37% marginal tax rate, but his employer’s concessional contributions into the fund are taxed at only 15%.

There are yearly caps in place which determine how much can be contributed to superannuation before tax. Anything above this amount attracts additional tax — it hurts, a lot. 

High-income earners — e.g. those earning more than $300,000 — may pay more tax for concessional contributions than the rest of us, common folk.

Individuals can also make after tax contributions to super, called non-concessional contributions.

Did you know Rask Education offers investing, budgeting, tax and finance courses? Here are the three most popular:

Absolutely no credit card or payment information required -- all you need is an email address!

Owen Raszkiewicz

Owen Raszkiewicz

Owen is the Founder of Rask Australia, Lead Investment Analyst for Rask Invest and head educator at Rask Education. Prior to founding Rask, Owen was an investment analyst at the highly regarded managed funds research business Zenith Investment Partners and a Writer/Analyst for The Motley Fool Australia. Owen’s formal qualifications include a Master of Applied Finance and Master of Financial Planning from Kaplan Professional, Bachelor of Technology (Information Systems) from Swinburne University of Technology, Advanced Diploma of Financial Services (Financial Planning) and Diploma of Mortgage Broking Management. He's also completed level 1 of the Chartered Financial Analyst (CFA) program.

Share this post:

Share on facebook
Share on twitter
Share on linkedin
Share on email
Share on whatsapp