Superannuation is one of the most tax-effective savings vehicles available to Australian individuals and business owners. Making concessional (before-tax) contributions can significantly reduce taxable income – but only up to the annual cap. Exceed that cap and the tax benefits reverse quickly, with excess contributions taxed at the individual’s marginal rate rather than the concessional 15%.
With the end of the 2025-26 financial year approaching and new thresholds applying from 1 July 2026, understanding the concessional contributions cap – what counts, what the limits are, and how to use carry-forward rules – is important for business owners, company directors, employees, and self-employed individuals alike.
What are Concessional Contributions?
Concessional contributions are super contributions made from pre-tax income. They are taxed at a flat rate of 15% inside the super fund, which is significantly lower than most individuals’ marginal tax rates. This is the core tax advantage that makes contributing to super before the cap is reached an attractive strategy for most working Australians.
The main types of concessional contributions include:
Contribution Type | Who Makes It | Example |
Employer SG contributions | Employer | Mandatory 11.5% (FY2025-26) or 12% (FY2026-27) of ordinary time earnings |
Salary sacrifice contributions | Employee (via employer) | Employee directs a portion of pre-tax salary into super |
Personal deductible contributions | Self-employed or individual | Personal contributions claimed as a tax deduction via a notice of intent |
Defined benefit contributions | Employer (DB fund) | Notional contributions calculated under specific rules |
The Concessional Contributions Cap for 2025-26 and 2026-27
The concessional contributions cap is indexed to Average Weekly Ordinary Time Earnings (AWOTE) in $2,500 increments. The cap for FY2025-26 is $30,000. The cap for FY2026-27 is expected to remain at $30,000, as the indexation threshold has not yet been reached, though this should be confirmed with the ATO or a financial adviser closer to 1 July 2026.
Financial Year | Concessional Cap | SG Rate | Tax Rate Inside Fund |
2023-24 | $27,500 | 11% | 15% |
2024-25 | $30,000 | 11.5% | 15% |
2025-26 | $30,000 | 11.5% | 15% |
2026-27 (projected) | $30,000 | 12% | 15% |
Note: High-income earners with income above $250,000 (including concessional super contributions) pay an additional 15% tax on concessional contributions under Division 293 tax, bringing the effective rate to 30% – still lower than the top marginal rate of 47% but less advantageous than for standard-rate taxpayers.
What Counts Towards the Concessional Cap?
All concessional contributions made to any super fund during the financial year count towards the cap. This includes contributions made by an employer on the individual’s behalf, salary sacrificed amounts, and any personal contributions for which a tax deduction is claimed.
For employees, even if they make no voluntary contributions, their employer’s mandatory SG contributions alone may consume a significant portion of the cap – particularly for higher-income earners. For example:
Annual Salary | SG at 11.5% (FY2025-26) | Cap Remaining for Voluntary Contributions |
$100,000 | $11,500 | $18,500 |
$150,000 | $17,250 | $12,750 |
$200,000 | $23,000 | $7,000 |
$261,000+ | $30,015 (cap reached) | $0 (SG alone hits the cap) |
This demonstrates why it is important for higher-income earners to monitor their SG contributions alongside any salary sacrifice or personal deductible contributions, to avoid inadvertently breaching the cap.
The Carry-Forward Rule: Using Unused Cap Amounts
Since 1 July 2019, individuals with a total superannuation balance (TSB) below $500,000 on 30 June of the prior year can carry forward unused concessional cap amounts from the previous five financial years and contribute more than the standard annual cap in a single year.
How Carry-Forward Works
Unused cap amounts from FY2019-20 onwards accumulate and can be accessed in any subsequent year, provided the TSB condition is met. Unused amounts expire after five years on a rolling basis – the oldest year’s unused amount drops off each year.
For example, a sole trader who contributed only SG-equivalent amounts in prior years and has a super balance below $500,000 may be able to make a large personal deductible contribution in FY2025-26 to use accumulated carry-forward amounts, significantly reducing taxable income in a high-income year.
Financial Year | Annual Cap | Contributions Made | Unused Amount (Carry-Forward) |
2020-21 | $25,000 | $10,000 | $15,000 |
2021-22 | $27,500 | $12,000 | $15,500 |
2022-23 | $27,500 | $27,500 | $0 |
2023-24 | $27,500 | $15,000 | $12,500 |
2024-25 | $30,000 | $30,000 | $0 |
2025-26 (available cap) | $30,000 + $43,000 carry-forward = $73,000 | – | – |
The total available cap in FY2025-26 in this example would be $73,000 – the standard $30,000 cap plus $43,000 in accumulated unused amounts from prior years, provided the TSB was below $500,000 on 30 June 2025.
What Happens If You Exceed the Concessional Cap?
Exceeding the concessional contributions cap has direct tax consequences. The ATO automatically assesses excess concessional contributions and issues an excess concessional contributions tax assessment.
The Tax Treatment of Excess Contributions
- Excess concessional contributions are included in the individual’s assessable income for the financial year
- A 15% tax offset is applied to reflect the contributions tax already paid inside the fund
- The net effect is that excess contributions are taxed at the individual’s marginal rate, minus the 15% offset
- The individual can elect to release up to 85% of the excess from super to pay the resulting tax bill
Excess contributions are not penalised with a surcharge – the outcome is simply that the tax advantage of the concessional rate is lost for the excess amount. However, for high-income earners already paying Division 293 tax, the combined effect can make breaching the cap a costly mistake.
Concessional Contributions for Business Owners and the Self-Employed
For business owners, sole traders, and partners, concessional contributions work differently from those for employees. There is no employer making mandatory SG payments, which means the full $30,000 cap may be available for personal deductible contributions – but only if the correct process is followed.
Personal Deductible Contributions: The Notice of Intent
To claim a tax deduction for personal super contributions, a valid notice of intent to claim a deduction must be lodged with the super fund before the earlier of:
- The date the individual lodges their income tax return for the financial year, or
- 30 June of the year following the contribution year
If the notice is not lodged on time, the contribution cannot be treated as concessional and no deduction is available. This is a common and costly mistake, particularly for first-time contributors or those who switch super funds during the year. Note that the notice cannot be lodged if the super fund no longer holds the contribution — for example, if benefits have been paid out or rolled over to another fund in the interim
Timing Contributions Before 30 June
For personal contributions to count in FY2025-26, the funds must be received by the super fund before 30 June 2026 – not just transferred or authorised. Allow sufficient processing time, particularly for bank transfers made in the final days of June.
Business owners across a range of sectors – from professional services to construction and retail – often benefit from reviewing their super contribution position before year-end as part of broader EOFY tax planning. Understanding how super contributions interact with the overall tax position of the business and its owners requires looking at both the Australian income tax scale and the business’s own taxable income.
Salary Sacrifice: A Strategy for Employees
For employees, salary sacrifice is the most common way to make additional concessional contributions. Under a salary sacrifice arrangement, the employee agrees to forgo a portion of their pre-tax salary in exchange for the employer contributing that amount directly to super.
Key points for salary sacrifice arrangements:
- The sacrificed amount reduces the employee’s assessable income, lowering income tax
- The contribution is taxed at 15% inside the fund rather than the employee’s marginal rate
- The arrangement must be in place before the income is earned – salary cannot be redirected to super retrospectively
- Salary sacrificed amounts count towards the concessional cap along with employer SG contributions
- Employers are not required to offer salary sacrifice but most will accommodate a reasonable request
For businesses managing salary sacrifice arrangements across a workforce, ensuring payroll is correctly configured to treat sacrificed amounts as reportable employer super contributions (RESCs) and to exclude them from gross taxable wages is an important compliance requirement. Businesses using outsourced payroll services can ensure salary sacrifice is correctly processed, reported through STP, and reconciled at EOFY.
Key Super Contribution Dates Before 30 June 2026
Action | Deadline | Notes |
Make a personal deductible contribution | Before 30 June 2026 | Funds must be received by the fund, not just transferred |
Lodge notice of intent to claim deduction | Earlier of tax return lodgement or 30 June 2027 | Must be acknowledged by the fund before the deduction is valid |
Employer SG contributions received by the fund | Before 30 June 2026 | Required for deductibility in FY2025-26 |
Check carry-forward eligibility (TSB) | 30 June 2025 balance | TSB must have been below $500,000 on 30 June 2025 |
Review Division 293 exposure | Before year-end | Relevant for individuals with income above $250,000 |
Getting super contributions right before 30 June – particularly for business owners and high-income earners – is a meaningful opportunity to reduce tax. Befree supports business owners and individuals with year-end tax planning, payroll compliance, and super contribution strategies, helping clients make the most of available concessions before key deadlines close.
For a complete picture of year-end obligations, the EOFY checklist for Australian small businesses covers super, tax, payroll, and bookkeeping tasks that should be completed before 30 June 2026.
Frequently Asked Questions (FAQ)
What is the concessional contributions cap for 2025-26?
The concessional contributions cap for FY2025-26 is $30,000. This includes all concessional contributions made during the year – employer SG contributions, salary sacrifice, and personal deductible contributions. The cap is projected to remain at $30,000 for FY2026-27.
Do employer super contributions count towards the concessional cap?
Yes. All employer superannuation contributions – including mandatory SG contributions and any additional employer contributions – count towards the individual’s concessional contributions cap for the year. Employees should account for their SG contributions when planning any additional voluntary contributions.
What is the carry-forward rule for concessional contributions?
If your total superannuation balance was below $500,000 on 30 June of the prior financial year, you can carry forward unused concessional cap amounts from the previous five years and contribute above the standard annual cap in a single year. Unused amounts expire on a rolling five-year basis.
What happens if I exceed the concessional contributions cap?
Excess concessional contributions are included in your assessable income and taxed at your marginal rate, with a 15% tax offset applied to reflect contributions tax already paid inside the fund. You can elect to release up to 85% of the excess from super to fund the resulting tax liability. The excess is not subject to a separate penalty, but the concessional tax advantage is lost.
Can I claim a tax deduction for personal super contributions?
Yes, provided you lodge a valid notice of intent to claim a deduction with your super fund before lodging your tax return (or by 30 June of the following year, whichever is earlier). The fund must acknowledge the notice before the deduction is valid. This option is available to most individuals under 75 who meet the work test if aged 67-74.
What is Division 293 tax?
Division 293 tax is an additional 15% tax on concessional super contributions for high-income earners whose income (including concessional contributions) exceeds $250,000. It brings the effective tax rate on those contributions to 30% – double the standard concessional rate, though still below the top marginal rate of 47%.
Can salary sacrifice contributions exceed the concessional cap?
Salary sacrifice contributions count towards the concessional cap alongside employer SG contributions. If the combined total of SG contributions and salary sacrifice exceeds $30,000, the excess is treated as an excess concessional contribution and taxed at the individual’s marginal rate. It is important to monitor total contributions during the year, not just at year-end.