The Concessional Contributions Cap

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Boost Your Super – Understanding the Concessional Contributions Cap in Australia

Australia’s superannuation system is a powerful tool for building retirement savings. One key element to maximising your super is understanding the concessional contributions cap. This article dives deep into this concept, explaining what it is, how it works, and strategies to optimise your contributions within the cap for a comfortable retirement.

What Is The Concessional Contributions Cap?

The concessional contributions cap is the annual limit on before-tax contributions you can make to your super fund. These contributions benefit from a concessional tax rate of 15%, significantly lower than your marginal tax rate.[i] For the 2023-24 financial year, the concessional contributions cap is $27,500.[ii]

Understanding Concessional Contributions

Concessional contributions encompass various elements that add up to your total for the year:

  • Employer superannuation guarantee (SG) contributions: Your employer is legally obligated to contribute a percentage of your salary (currently 10.5%) into your super fund.[iii]
  • Salary sacrifice contributions: This involves agreeing to reduce your pre-tax salary and divert the difference into your super. This lowers your taxable income and boosts your super balance.
  • Personal deductible contributions: You can make voluntary contributions to your super and claim a tax deduction for them, effectively reducing your taxable income.

Why Is There A Cap?

The cap helps ensure the super system remains sustainable and prevents excessive tax concessions for high-income earners. It also encourages a balance between super contributions and current living expenses.

Exceeding The Cap – What Happens?

If you contribute more than the concessional cap, the excess amount is treated as an excess concessional contribution (ECC). This triggers tax implications:

  • Excess tax charge: The ECC is taxed at your marginal tax rate, potentially higher than the concessional 15% rate.
  • Division 293 tax: For contributions exceeding $250,000 (income plus concessional contributions), an additional 15% tax may apply.

Strategies To Maximize Contributions Within The Cap

Here are some ways to make the most of your concessional contributions cap:

  • Salary sacrifice: Consider salary sacrificing a portion of your pre-tax salary. This reduces your taxable income while boosting your super. Financial advisors can help you determine the optimal salary sacrifice amount.[iv]
  • Maximize employer contributions: Explore if your employer offers additional super contributions on top of the SG obligation.
  • Catch-up contributions: If you have unused cap space from previous years (under specific eligibility criteria), you may be able to utilize the carry-forward provision. This allows you to contribute more in a current year to compensate for unused caps in past years (up to five years back). However, eligibility hinges on having a total super balance below $500,000 at the previous financial year’s end.
  • Consolidate your super: Having multiple super accounts can lead to unnecessary fees. Consolidating your accounts into one simplifies management and potentially reduces fees, allowing more to go towards your retirement savings.

Planning For The Future – Considerations Beyond The Cap

While the concessional contributions cap offers a tax-effective way to grow your super, it’s not the only factor to consider for a secure retirement. Here are some additional aspects to keep in mind:

  • Total super balance: The concessional cap applies regardless of your age. However, there are higher contribution caps for individuals nearing retirement (check with the ATO for details).
  • Investment strategy: Review your super fund’s investment options and choose one that aligns with your risk tolerance and retirement timeline.
  • Lifestyle expectations: Consider your desired retirement lifestyle and estimate the income needed to sustain it. This will help determine how much super you need to accumulate.


Understanding the concessional contributions cap is crucial for optimising your super contributions and building a healthy retirement nest egg. By utilising salary sacrifice, carry-forward provisions (if eligible), and consolidation strategies, you can maximise your contributions within the cap. Remember, the cap is just one piece of the puzzle. Consider your total super balance, investment strategy, and desired retirement lifestyle for a comprehensive plan. Consulting a financial advisor can provide valuable guidance in navigating the complexities of superannuation and tailoring a strategy specific to your circumstances.

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Important Disclaimer: The information provided in this article is general in nature and does not constitute financial advice. Please consult with a qualified financial advisor to discuss your individual circumstances.


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