There are only two ways money gets into your superannuation: before tax or after tax. Everything else — salary sacrifice, employer contributions, spouse contributions, the co-contribution, downsizer amounts, carry-forward strategies — is just a variation on one of those two themes.
The formal names are concessional (before-tax) and non-concessional (after-tax) contributions. They’re taxed differently, capped differently, and suit different people at different stages of life. Get the distinction right and you can save thousands in tax. Get it wrong and you can trigger penalty tax, forfeit a deduction, or miss a government incentive you were entitled to.
This is the foundational guide to how both work, what the current caps are, and which one you should be using.
The Core Difference
Concessional contributions go into super before tax (or are claimed as a tax deduction). They reduce your taxable income, but they’re taxed at 15% on the way into your fund.
Non-concessional contributions come from money you’ve already paid tax on. You can’t claim a deduction for them, but they’re not taxed again when they enter super.
Concessional | Non-concessional | |
|---|---|---|
Also called | Before-tax | After-tax |
Tax on entry | 15% (30% if you earn over $250,000) | Nil |
Reduces your taxable income | Yes | No |
2026–27 annual cap | $32,500 | $130,000 |
Includes | Employer SG, salary sacrifice, personal deductible contributions | Personal after-tax contributions, spouse contributions, some transfers |
Special rule | Carry-forward (unused caps from 5 years) | Bring-forward (up to 3 years' cap) |
Best for | Higher income earners reducing tax | Lower earners, those near caps, large one-off amounts |
The simple logic: concessional contributions save you tax now; non-concessional contributions build tax-free components for later.
Concessional Contributions Explained
These are the before-tax concessional super contributions that sit within the broader rules for super contributions, and for most people they happen automatically.
What counts as concessional:
Employer Superannuation Guarantee (SG) — the compulsory contributions your employer makes
Salary sacrifice — an arrangement where you direct part of your pre-tax salary into super
Personal deductible contributions — money you contribute yourself and then claim a tax deduction if the Notice of Intent process is completed correctly
The 2026–27 concessional contributions cap is $32,500 (up from $30,000 in 2025–26). This is a combined cap covering all three types, across all your super funds. Your employer’s SG counts towards it, which surprises people who assume the cap is theirs alone to fill. These limits matter because super contribution rules are part of compliance with Australian tax and superannuation laws.
The tax: Concessional contributions are taxed at 15% inside the fund. If you earn more than $250,000, Division 293 applies an extra 15%, bringing the effective rate to 30%. Even at 30%, that’s still below the top marginal rate of 47%, so concessional contributions generally remain tax-effective for high earners.
Carry-forward: Under the carry forward rule, if your total super balance was under $500,000 at 30 June of the previous financial year, you can use unused concessional cap amounts from the prior five years on top of the current year’s cap. Someone with $60,000 in unused cap could contribute $92,500 in 2026–27. This means you can carry forward unused concessional contributions for five years. This is one of the most powerful and underused strategies in super, particularly for people with variable income, a career break, or a one-off high-income year (such as selling an asset).
The deduction trap: If you’re claiming a tax deduction on a personal contribution, you must lodge a Notice of Intent to Claim with your fund and receive their acknowledgement before you lodge your tax return, and before you roll over or start a pension with that money. Miss this and the deduction is lost permanently.
Non-Concessional Contributions Explained
These are after tax super contributions — a form of voluntary contributions made from after tax money, including money from your after tax pay or other extra money such as savings, contributed without claiming a deduction.
What counts as non-concessional: these non concessional super contributions include:
Personal contributions from your after-tax income
Spouse contributions made into your account
Contributions eligible for the government co-contribution
Certain transfers from foreign super funds
Low-income earners may also qualify for the co-contribution, subject to the relevant eligibility rules.
The 2026–27 non concessional contributions cap is $130,000 per year, across all your funds. These contributions let you move larger after-tax amounts into super to build retirement savings.
The critical restriction: Your non-concessional cap is nil if your total super balance across your super account was equal to or above the general transfer balance cap ($2.1 million for 2026–27) at 30 June of the previous year. Contribute anyway and you’ll face excess contributions tax.
The bring-forward rule: If you’re under 75, you may be able to bring forward up to three years of the non-concessional cap and contribute a large lump sum at once, which can help when making non concessional contributions to add money to your super. What you can bring forward depends on your total super balance at 30 June of the previous year:
Under $1.84 million → bring forward 3 years = $390,000
$1.84m to under $1.97 million → bring forward 2 years = $260,000
$1.97 million or above → no bring-forward; $130,000 current year only
$2.1 million or above → nil; no non-concessional contributions at all
An important warning: once you trigger the bring-forward, you’re locked into the cap amount that applied at the time. If the annual cap later increases, you can’t take advantage of it during your bring-forward period, and downsizer contributions are a separate exception that don’t use the ordinary non-concessional cap.
The Tax Logic: Which Should You Use?
The decision usually comes down to your marginal tax rate versus the 15% contributions tax, including how much tax applies inside super compared with personal rates.
Concessional contributions make sense when:
Your marginal tax rate is above 15% — concessional contributions can mean pre tax super contributions that help you pay less tax than taking the same amount as salary, and dramatically so for higher earners
You want to reduce your taxable income this year
You have unused carry-forward cap and a high-income year to offset (selling an investment property, receiving a bonus)
You’re a high earner even if Division 293 applies — 30% still beats 47%, depending on the income tax rate that would otherwise apply
Non-concessional contributions make sense when:
You’ve already maxed your concessional cap and want to make extra contributions — extra money added from after-tax income to support your financial future
You’re a lower income earner — if your marginal rate is 15% or less, a concessional contribution offers no tax advantage, while a non-concessional contribution may attract the government co-contribution (up to $500) or a spouse contribution tax offset (up to $540)
You have a large lump sum from an inheritance, asset sale or windfall, and want to move it into super’s low-tax environment, which can increase your retirement balance over time
You’re building your tax-free component, which matters enormously if your super will eventually be inherited by adult children (who pay tax on the taxable component but not the tax-free component)
That last point is the strategic one most people miss. Non-concessional contributions create tax-free components inside your super. When you die, a financially independent adult child pays tax on the taxable component but nothing on the tax-free component. Deliberately building the tax-free portion — through non-concessional contributions, or a withdrawal and re-contribution strategy — can save your beneficiaries a substantial death tax bill, and investment earnings in super are generally taxed at concessional rates in accumulation phase, which affects the overall tax you pay.
What Happens If You Exceed a Cap?
Not catastrophic, but not painless either, and contribution limits can change over time.
Excess concessional contributions are added to your assessable income and taxed at your marginal rate (with a 15% tax offset for the tax already paid by the fund), plus an excess concessional contributions charge, so there are real tax implications if you go over the cap. You can elect to withdraw up to 85% of the excess.
Excess non-concessional contributions are worse. You can withdraw the excess plus 85% of the associated earnings (with those earnings taxed at your marginal rate), or leave the excess in super and have it taxed at the top marginal rate plus Medicare levy — 47% — effectively extra tax for going over the cap.
Because your caps count contributions across all your funds, and employer SG counts toward your concessional cap, exceeding a cap accidentally is easier than people expect — especially in a year when you change jobs or receive a large bonus, with the Australian Taxation Office ultimately administering these excess contribution outcomes.
Where Professional Advice Adds Value
Concessional and non-concessional contributions are simple in principle and full of traps in practice. The caps change with indexation, the bring-forward tiers depend on your total super balance at a specific date, the carry-forward rules have their own $500,000 threshold, and a missed notice of intent can permanently cost you a deduction. Meanwhile, the right strategy for a 35-year-old on $80,000 looks nothing like the right strategy for a 62-year-old with $1.9 million about to sell a business.
At Money Path, we work out the contribution strategy that fits your actual position. We look at your marginal tax rate, your total super balance, your remaining cap headroom (including unused carry-forward amounts) and your timeframe to retirement, in the broader context of tax super contributions, then model whether concessional, non-concessional, or a combination gives you the best after-tax outcome based on the tax you pay now versus later. We coordinate the timing — salary sacrifice, called salary packaging by some employers, bring-forward triggers, notice-of-intent deadlines, one-off high-income years — so the strategy actually lands where it should. And we look beyond the immediate tax deduction to the long game: transfer balance cap efficiency, Division 296 exposure, and building the tax-free component that will one day save your children a significant tax bill while strengthening your financial future.
Superannuation is the most tax-effective structure most Australians will ever have access to. Using it well is worth getting right.
If you want to know which contribution strategy suits your circumstances, talk to the team at Money Path.
Frequently Asked Questions
What’s the difference between concessional and non-concessional contributions? Concessional contributions go into super before tax (or are claimed as a tax deduction) and are taxed at 15% on entry. They include employer SG, salary sacrifice and personal deductible contributions. Non-concessional contributions are made from money you’ve already paid tax on, aren’t tax-deductible, and aren’t taxed again when they enter super. The caps and strategies for each are different.
What are the super contribution limits for 2026–27? The concessional (before-tax) cap is $32,500 per year, up from $30,000 in 2025–26. The non-concessional (after-tax) cap is $130,000 per year. Under the bring-forward rule, eligible people under 75 may contribute up to $390,000 of non-concessional contributions over three years, depending on their total super balance. These contribution limits can change, so check the current financial year before acting.
How are concessional contributions taxed? At 15% when they enter your super fund. If your income (including your concessional contributions) exceeds $250,000, Division 293 tax applies an additional 15%, bringing the effective rate to 30%. Even so, this remains below the top marginal rate of 47% income tax, so concessional contributions are usually still tax-effective for high earners.
What is the bring-forward rule? It lets people under 75 contribute up to three years’ worth of the non-concessional cap in one go. For 2026–27, if your total super balance was under $1.84 million at 30 June, you can bring forward three years ($390,000). Between $1.84m and $1.97m, two years ($260,000). At $1.97m or above, no bring-forward. At $2.1 million or above, your non-concessional cap is nil.
What is carry-forward and how does it work? The carry forward rule lets you use unused concessional cap from the previous five years if your total super balance was under $500,000 at 30 June of the previous year, on top of the current year’s $32,500 cap. For example, $60,000 of unused cap would let you contribute $92,500 in 2026–27. It’s especially useful in a high-income year, such as when you sell an asset or receive a large bonus.
Should I make concessional or non-concessional contributions? Generally, concessional contributions suit anyone whose marginal tax rate exceeds 15%, since you save the difference. Non-concessional contributions, made from money on which you have already paid income tax, suit lower income earners (who may also qualify for the government co-contribution), people who’ve already maxed their concessional cap, those with a large lump sum to invest, and anyone building the tax-free component to reduce future death benefit tax for adult children.
What happens if I exceed my contribution caps? Excess concessional contributions are added to your taxable income and taxed at your marginal rate, with a 15% offset for tax already paid, plus a charge. Excess non-concessional contributions are more punitive: you can withdraw them plus 85% of associated earnings, or leave them in super where they’re taxed at 47%. Since caps count contributions across all funds and include employer SG, accidental breaches are common.
Do employer contributions count towards my concessional cap? Yes. Employer contributions are part of your concessional super contributions and count towards your $32,500 concessional cap, as do any salary sacrifice amounts and personal contributions you claim as a deduction. This catches people out — the cap isn’t yours alone to fill, so check how much SG you’re already receiving before adding more.
Why do non-concessional contributions matter for my estate? Because they create tax-free components in your super. When you die, a financially independent adult child pays tax on the taxable component of your super (up to 17%, or 32% on any untaxed element) but nothing on the tax-free component. Building the tax-free portion through non-concessional contributions, or a withdrawal and re-contribution strategy, can significantly reduce the tax your beneficiaries pay.
This article is general information only and does not take into account your personal objectives, financial situation or needs. Super caps, thresholds and rules are indexed and change; figures are current as at the date of writing for the 2026–27 financial year. Always confirm current figures with the ATO and seek personal financial advice before acting.
