Concessional Contributions

What is a Concessional Contribution?

Concessional contributions are contributions made to a super fund that are not treated as a non-concessional contribution.

How does it work?

Concessional contributions include contributions made by an employer on behalf of an employee including the Super Guarantee contributions, and contributions made under an effective salary sacrifice arrangement.

The Super Guarantee rate will increase each year until 1 July 2025 when it reaches 12%

Personal contributions may also be treated as concessional contributions where the person making the contribution claims a personal tax deduction for their contribution.

Eligibility to contribute

Concessional contributions can be made for an individual under the age of 75.

If you are claiming a personal tax deduction, then you will be required to meet the work test if you are between 67-74 years old. That is, you must work at least 40 hours over a 30-day period in the relevant financial year.

Taxation of concessional contributions

Concessional contributions are treated as assessable income of the super fund to which they are made. They are taxed within the fund at a rate of 15%.

High income earners - people with an income of more than $250,000 per annum - pay an additional tax of 15% on their concessional contributions. This is referred to as Division 293 tax and is levied on the taxpayer personally, rather than on their super fund.

Contribution Cap

There is a limit for the amount of concessional contributions that may be made in a financial year. This is referred to as the concessional contribution cap. The annual concessional contributions cap for the 2022/23 financial year is $27,500 per annum.

Excess concessional contributions

If you exceed your concessional contributions cap, excess contributions may be taxed at your marginal tax rate (with a 15% tax offset). You can elect to have up to 85% of excess contributions refunded from super – any amounts not refunded will count towards your non-concessional contributions cap.

Salary sacrifice arrangements

The basic requirements for a salary sacrifice arrangement to be effective include:

• A formal agreement is put in place between yourself and your employer to make the salary sacrifice contributions.

The sacrificed salary must be permanently forgone for the period of the agreement.

Low income superannuation tax offset (LISTO)

Where a person has adjusted taxable income of less than $37,000 the government will refund the contributions tax on the first $3,330 of concessional contributions. This provides a refund up to $500 per year. This is paid automatically to the super fund to be credited to the person's super account.

To qualify for LISTO, at least 10% of total income must be derived from employment or self-employment.

Concessional Contribution carry forward

One of an extensive range of superannuation reforms the Federal Government announced in its 2016 Budget relates to the opportunity for eligible people to carry forward the unused portion of their concessional contribution cap. Now legislated, this initiative commenced from 1 July 2018.

Total Superannuation Balance

You can use the catch-up contributions provision to contribute at a higher rate than the concessional cap. If your super balance is below $500,000 on 30 June of the previous financial year, you can carry forward any unused concessional contribution cap for up to 5 years (starting from 2017/18).

How the carry-forward opportunity works?

Any unused concessional contribution cap that accrues from 1 July 2018 may be carried forward for a period of up to five years.

If the concessional contribution cap was not fully utilised in any financial year before 1 July 2018, the unused portion cannot be carried forward.

This information is of a general nature. It does not consider your personal objectives, needs or situation. It does not represent legal, tax or personal advice and should not be taken as such. If it has been provided to you with a Statement of Advice (SoA), you should rely on the personal advice in the SoA.

Care has been taken to provide up to date and accurate information relating to the subject area however BR Advice Pty Ltd (ABN 30 612 056 523, AFSL 488655), Blue Rock Private Wealth Pty Ltd (ABN 95 166 927 055, AFSL 452733), Blue Rock Private Wealth (Melb) Pty Ltd (ABN 48 652 202 698, ASIC AFS No. 1298365) and their representatives make no representation as to its accuracy or completeness.

Published: September 2022.

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