What Is The Difference Between Concessional And Non-Concessional Contributions?

Both concessional and non-concessional contributions are payments made to a superannuation fund, however they are taxed differently. There are also different contribution caps for each type.

Simply put, concessional contributions are where an individual has been concessionally taxed on the contribution – that is they have not been taxed at their marginal tax rate. Superannuation Guarantee (SG) contributions from an employer and salary sacrifice are concessional contributions.

Non-concessional contributions are when there has not been any concessional tax treatment of the contribution. Usually non-concessional contributions are where people contribute their own after-tax money  into their super fund. Often people approaching retirement try to get their assets into the super environment because Australia’s super system is excellent.

It is important to note that whilst both concessional and non-concessional contributions are effectively taxed the same once in the fund, there are differences at time of death. For some reason the government of the day approved the daft idea that the concessional component of someones super balance should be taxed at 15% (plus medicare levy) unless paid to your spouse or ‘dependent’. For example, any concessional component in your super will be taxed at 15% if paid out to an adult child.  The reason this is daft is because someone on their death bed can withdraw their entire pension balance and then pass it to anyone they wish tax-free. The non-concessional component will be tax free regardless of who it is paid to.


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