Concessional vs Non-Concessional Super: The Plain-English Guide
Concessional or non-concessional super contributions? The real difference, the 2025-26 caps, the tax treatment, and which one suits you, in plain English.
By Timothy Hirou GaschereauPublished 12 min read
Super contributions. Two words that should be simple but somehow feel like they need a law degree. They do not. There are really just two types: money that goes in before you pay income tax on it (concessional), and money that goes in after you have already paid income tax on it (non-concessional). That is the whole distinction.
The reason it matters is tax. Each type is treated differently by the ATO, has a different annual cap, and suits different situations. Get it right and you legally cut your tax while building a bigger nest egg. Get it wrong and you pay penalty tax you did not need to.
🎯 The essential: Concessional contributions are before-tax money (employer SG, salary sacrifice, personal deductible), taxed at 15% going in, capped at $30,000 for 2025-26, and they reduce your taxable income. Non-concessional contributions are after-tax money, taxed 0% going in, capped at $120,000 (up to $360,000 via bring-forward), with no deduction. High earners usually favour concessional for the tax saving; low earners and those with a lump sum often favour non-concessional. Most people use both, and your employer's SG already uses part of your concessional cap.
What are concessional contributions?
Concessional contributions are before-tax money going into super, taxed at a flat 15% inside the fund instead of your marginal rate. Three ways they get there: your employer's Super Guarantee (12% from 1 July 2025, which counts toward the cap automatically), salary sacrifice (pre-tax salary redirected into super, covered in our salary sacrifice guide), and personal deductible contributions (after-tax money you claim a deduction for via a Notice of Intent, popular with the self-employed).
The cap for 2025-26 is $30,000 a year (up from $27,500), including your employer's SG. If your income plus concessional contributions exceed $250,000, Division 293 adds an extra 15% on the amount over the threshold. And if your total super balance is under $500,000, the carry-forward rule lets you use unused cap from the previous five years.
What are non-concessional contributions?
Non-concessional contributions are after-tax money. You have already paid income tax on it, so it is not taxed again going in (0% contributions tax), and there is no deduction. What you gain is getting money into a low-tax environment where earnings are taxed at just 15% (or 0% in pension phase) rather than your marginal rate outside super. Common sources: savings, an inheritance, or proceeds from selling an investment property.
The cap for 2025-26 is $120,000 a year. If you are under 75 with a total super balance below the relevant threshold, the bring-forward rule lets you contribute up to $360,000 in one year (three years' worth at once). There are also spouse contributions (a tax offset of up to $540 if your spouse earns under $40,000) and the government co-contribution, covered below.
Concessional vs non-concessional: the head-to-head
| Concessional | Non-concessional | |
|---|---|---|
| Source | Before-tax income | After-tax money |
| Contributions tax | 15% (30% via Div 293) | 0% |
| Cap (2025-26) | $30,000 | $120,000 (up to $360k) |
| Tax deduction | Yes, cuts taxable income | No |
| Earnings tax in super | 15% (0% in pension) | 15% (0% in pension) |
| Best for | Reducing tax now | Lump sums, low earners + co-contribution |
Concessional saves tax now: on a 34.5% marginal rate, every $1,000 salary sacrificed saves $195 (you pay 15% instead of 34.5%); at the top 47% rate, $320. Non-concessional gives no upfront deduction but shelters lump sums in the 15% super environment. Both enjoy the same low tax once inside; the difference is purely how they get there.
Who suits concessional contributions?
Concessional is a strong fit if you are a mid-to-high income earner wanting to reduce tax this year, an employee who can salary sacrifice, self-employed making personal deductible contributions, or someone with unused carry-forward cap and a balance under $500,000. One caveat: if your taxable income is under $18,200, the 15% contributions tax is actually higher than your 0% marginal rate, so concessional can be a bad deal for very low earners (the Low Income Super Tax Offset partially fixes this under $37,000).
Who suits non-concessional contributions?
Non-concessional makes most sense if you have a lump sum to get into super (inheritance, property sale, savings), you have already maxed the concessional cap, you are a lower earner where the concessional tax saving is small, or you are nearing retirement and want to boost your balance fast via bring-forward. Downsizers aged 55+ can also contribute up to $300,000 from a home sale under separate rules, and spouse contributions can even up balances in a couple.
The government co-contribution (a bonus for low earners)
Genuinely underused. If your total income is under $58,445 in 2025-26 and you make a non-concessional contribution, the government may top up your super automatically: contribute at least $1,000 and earn under $43,445 and you get the full $500 (tapering to zero by $58,445). You do not apply, the ATO works it out from your return.
That is a 50% instant return on a $1,000 non-concessional contribution for eligible earners. This is the clearest case where non-concessional beats concessional for low earners, since the salary-sacrifice tax saving would be minimal anyway.
Can you make both types of contribution?
Yes, and most people effectively do. A practical order: your employer's SG uses part of the concessional cap automatically; if you have room left and want a deduction, top up concessionally via salary sacrifice or a personal deductible contribution; if you have extra money or a lump sum, use non-concessional up to $120,000 (or bring-forward for $360,000); and if you are a low earner, check whether the co-contribution makes non-concessional the better call first. Neither type wins outright, they solve different problems.
Key rules and warnings
- Do not exceed the caps. Excess concessional is added to your income (taxed at your marginal rate, with a 15% offset); excess non-concessional is taxed at 47% unless you elect to withdraw it.
- The money is preserved until preservation age (60 for most) and a condition of release, so do not contribute money you might need sooner.
- Division 293 applies above $250,000 income, adding 15% (total 30%) on the contributions over the threshold.
- Caps are indexed and change, so always check the ATO for current figures, and bring-forward eligibility depends on your 30 June balance.
Frequently asked questions
What is the difference between concessional and non-concessional contributions?
Concessional contributions are before-tax money (employer SG, salary sacrifice, personal deductible), taxed at 15% going into the fund and reducing your taxable income. Non-concessional contributions are after-tax money, not taxed again going in and with no deduction. The caps differ too: $30,000 vs $120,000 a year for 2025-26.
Which is better, concessional or non-concessional contributions?
It depends. Concessional is better if you want to cut your tax now and you are on a meaningful marginal rate. Non-concessional is better if you have a lump sum to invest, you have already used your concessional cap, or you are a low earner who qualifies for the government co-contribution. Most people benefit from using both.
Can I make both concessional and non-concessional contributions?
Yes. They have separate caps, so you can use both in the same year if you have the funds. Your employer's SG counts toward your concessional cap, but it does not affect your non-concessional cap at all.
What happens if I exceed the concessional or non-concessional cap?
Excess concessional contributions are added to your assessable income and taxed at your marginal rate (with a 15% offset for tax already paid in the fund). Excess non-concessional contributions are taxed at 47%, though you can elect to withdraw them instead. Either way, it is a situation worth avoiding.
Are non-concessional contributions taxed?
No, not going in. You have already paid income tax on this money, so it is not taxed again when it enters the fund (0% contributions tax). Once inside, earnings on all super are taxed at 15%, or 0% in pension phase.
What is the concessional cap for 2025-26?
The concessional contributions cap for 2025-26 is $30,000 a year, including your employer's SG, any salary sacrifice, and any personal deductible contributions. It rose from $27,500 on 1 July 2024. Caps are indexed, so check the ATO for the current figure.
Keep reading
Books worth reading
📚 Recommended reading
The Barefoot Investor
Scott Pape
The Barefoot Investor
Scott Pape
Australia's best-selling money book ever. A simple system for accounts, budgeting, debt and a real emergency fund in one.
Sort Your Money Out and Get Invested
Glen James
Sort Your Money Out and Get Invested
Glen James
From the host of the my millennial money podcast, a step-by-step Aussie plan to fix your spending, clear debt and actually start investing. Practical and refreshingly free of finance-bro nonsense.
Girls That Invest
Simran Kaur
Girls That Invest
Simran Kaur
A no-jargon crash course from the podcaster behind Girls That Invest that makes the sharemarket feel doable, written especially for women starting out. The perfect first step before you buy your first ETF.
Some links above are affiliate links. If you buy through them, Snowball Invest may earn a small commission at no extra cost to you. We only recommend books we'd suggest anyway.
Sources
- ATO, contributions caps (concessional and non-concessional), ato.gov.au
- ATO, concessional contributions cap, ato.gov.au
- ATO, non-concessional contributions cap, ato.gov.au
- ASIC Moneysmart, super contributions, moneysmart.gov.au
General information only, not personal financial or tax advice. Superannuation rules are complex and figures are 2025-26 and indexed. Consult a licensed financial adviser or registered tax agent for advice specific to your situation.
Was this article useful?
General information only. This article is educational and does not constitute personal financial advice. It does not account for your circumstances. Consider your own situation and seek advice from a licensed adviser before acting. Read our full disclaimer.
Timothy Hirou Gaschereau
Founder of Snowball Invest, not a financial adviser.
I write about what I'm learning myself, because nobody ever taught us how to take control of our own money. It's a skill, not a mystery, and it's never too late to learn it. The best day to start was yesterday, the second best is today.
LinkedIn →Related articles
Superannuation Death Benefit Tax: Who Gets Your Super and How Much Tax They Pay
Who gets your super when you die, and how much tax do they pay? A spouse pays nothing. An adult child can pay 17%. Here's exactly how the tax works.
Transition to Retirement (TTR): How the Strategy Actually Works
How a transition to retirement strategy actually works, the two common ways people use it, a worked example, and the tax nuance most explainers get wrong.
Salary Sacrifice Super: How It Works (And Is It Worth It?)
How salary sacrificing into super actually reduces your tax bill, the concessional cap limit to watch, and whether it's worth it for your situation.