Concessional contributions are one of the most effective tax-planning tools available within Australia’s superannuation system. When used properly, they can significantly reduce personal tax, accelerate retirement savings, and create flexibility later in life. When used poorly, they can result in excess contributions tax, lost deductions, and long-term planning issues that are difficult to unwind.
This article explains how concessional contributions actually work, the rules that matter in practice, and how sophisticated strategies are commonly used by advisers to optimise outcomes.
What are concessional contributions?
Concessional contributions are contributions made to superannuation from pre-tax income or contributions for which a tax deduction is claimed. They include:
- Employer Super Guarantee (SG) contributions
- Salary sacrifice contributions
- Personal contributions where a valid tax deduction notice is lodged and acknowledged
These contributions are generally taxed at 15% within the super fund, rather than at an individual’s marginal tax rate. For individuals on middle to high incomes, this difference alone can create substantial tax savings over time.
The concessional contribution cap
For the 2025–26 financial year, the concessional contribution cap is $30,000 per person.
Importantly, this cap includes all employer contributions. This is one of the most common misunderstandings we see in practice. Salary sacrifice does not sit on top of employer SG — it forms part of the same $30,000 limit.
Exceeding the cap does not mean the contribution is lost, but it does trigger additional tax and administrative complexity. Excess concessional contributions are effectively added back to personal taxable income, with an interest charge applied by the ATO.
Carry-forward concessional contributions
One of the most valuable — and underutilised — features of the system is the ability to use unused concessional cap amounts from prior years.
If your total super balance is under $500,000 at the previous 30 June, you may be eligible to access unused concessional caps from the last five financial years (on a rolling basis).
This allows individuals to make significantly larger deductible contributions in a single year, often aligned with:
- A high-income year or bonus
- Business profits or a business sale
- Redundancy payments
- Late-career retirement planning
The timing of these contributions is critical. Eligibility is tested at 30 June of the prior financial year, and unused caps expire if not used within five years.
Salary sacrifice vs personal deductible contributions
While both strategies fall under the concessional cap, they operate differently in practice.
Salary sacrifice involves an agreement with an employer to redirect part of salary into super before income tax is applied. This can be effective for smoothing cash flow and ensuring contributions are made progressively throughout the year.
Personal deductible contributions involve contributing after-tax funds to super and then claiming a tax deduction via the ATO. This strategy provides greater flexibility, particularly for:
- Business owners
- Contractors
- Individuals with irregular income
- Late-year tax planning
However, personal deductible contributions require strict paperwork. A valid Notice of Intent to Claim a Deduction must be lodged and acknowledged before certain events occur, including starting a pension or withdrawing funds.
Marginal tax rate arbitrage
At its core, concessional contribution planning is about tax arbitrage — moving money from a high-tax environment to a lower-tax one.
For someone on a marginal tax rate of 47% (including Medicare levy), contributing to super at a 15% contributions tax rate creates an immediate tax saving of 32% on the contributed amount.
However, this benefit must be weighed against:
- Access restrictions on super
- Timing of retirement
- Future tax treatment of withdrawals
- Estate planning considerations
This is why concessional strategies should never be viewed in isolation.
Age-based considerations
Contribution strategies change materially depending on age.
Under age 67, concessional contributions can generally be made without meeting a work test.
Between ages 67 and 74, individuals must meet the work test (or qualify for the work test exemption) to make personal deductible contributions, although employer SG contributions may still be received.
From age 75 onwards, concessional contributions are generally limited to mandated employer contributions.
These age thresholds have practical implications for late-career and pre-retirement planning.
Common mistakes and traps
Some of the most frequent issues we see include:
- Exceeding the concessional cap unintentionally
- Assuming employer SG does not count toward the cap
- Missing eligibility for carry-forward contributions
- Claiming deductions incorrectly or too late
- Making contributions shortly before starting a pension without proper sequencing
These mistakes are often irreversible and can materially reduce the effectiveness of a strategy.
Why advice matters
Concessional contributions interact with many other areas of financial planning, including:
- Retirement income strategies
- Transition-to-retirement planning
- Centrelink outcomes
- Estate planning and death benefit taxation
A technically correct contribution strategy that ignores the broader plan can still produce a poor outcome.
How EPG Wealth approaches concessional strategies
At EPG Wealth, concessional contribution strategies are designed as part of a broader financial framework. We focus on:
- Technical accuracy
- Tax efficiency
- Long-term sustainability
- Alignment with retirement and lifestyle objectives
If you would like to improve your current investment strategies or are looking to start your investment journey, click here to organise a complimentary 20-minute phone call with an EPG Wealth adviser.