How super contributions are treated depends on whether they're before-tax (concessional) or after-tax (non-concessional).
The tax paid on your super contributions generally depends on whether:
- the contributions are out of your before-tax or post-tax income
- you exceed the concessional or non-concessional contribution caps
- you're a high-income earner.
Contribution caps are the limits on how much you can pay into your super fund each financial year without having to pay extra tax. If you have more than one super fund, all your contributions are added up and count towards your caps.
If your combined income and concessional super contributions are more than $250,000, you may have to pay Division 293 tax on your contributions.
While there are restrictions on contributions, and your total super balance affects how the super rules apply to you, there is no limit on the total amount you can hold in accumulation phase in one or more super funds.
Before-tax and after-tax contributions
Contributions to your super fund can be made from income that has:
- not yet been taxed ('before tax' contributions) – which are concessional contributions
- already been taxed ('after tax' contributions) – which are non-concessional contributions.
Main categories of superannuation contributions
Media: Depending on your age and the type of contribution
https://tv.ato.gov.au/ato-tv/media?v=bd1bdiubfo8e4jExternal Link (Duration: 1:45)
Concessional contributions include:
- employer contributions, such as
- employer super guarantee contributions and any superannuation guarantee charge (SGC) shortfall amounts we've collected from your employer where they failed to pay contributions on time for you
- salary sacrificing contributions
- additional concessional contributions your employer makes as part of an agreement with you
- other amounts paid by your employer from your before-tax income to your super fund, such as administration fees and insurance premiums
- personal contributions you're entitled to claim as an income tax deduction
- notional taxed contributions to defined benefit and constitutionally protected funds)
- unfunded defined benefit contributions
- some amounts allocated from a fund reserve (amounts that form part of the fund's assessable income)
- amounts transferred from a foreign super fund where the assessable amount is greater than the vested amount at time of transfer
- for people over 18, contributions by
- a spouse living separately and apart from you on a permanent basis
- a parent, child, relative or friend if you are 18 years old or older
- any other third party other than an employer or your spouse.
Concessional contributions are taxed in your super fund at the rate of 15%, payable by the fund.
Non-concessional contributions include:
- contributions you or your employer makes from your after-tax income
- contributions your spouse makes to your super fund, unless
- your spouse is contributing for you as your employer
- you're separated or permanently living apart from your spouse, in which case a contribution they make for you is a third-party concessional contribution
- personal contributions you have not claimed and been allowed as an income tax deduction
- excess concessional (before-tax) contributions you have not released from your super fund
- contributions exceeding the lifetime CGT cap allowable under the small business CGT exemptions
- retirement benefits you withdraw from a super fund and 're-contribute' to super and which you have not claimed or been allowed as an income tax deduction
- contributions made for you by someone else if you are under 18 and the contributor is not your employer
- most transfers from foreign super funds (including New Zealand KiwiSaver contributions), not including amounts in your fund's assessable income
- life insurance premiums and fund fees (in some cases).
Exclusions from non-concessional contributions
The following types of contributions do not count towards your non-concessional contributions cap:
- personal injury payments (also known as structured settlement contributions)
- contributions you chose to count towards your capital gains tax (CGT) cap that have not exceeded your lifetime limit
- downsizer contributions from the proceeds of selling your home
- re-contribution of COVID-19 early release superannuation amounts.
These types of contributions are only excluded if you meet all the relevant conditions. You must specifically ask your fund to exclude them, by providing it with the relevant form before or when you contribute (for details, see the links above).
Government co-contributions are also not counted as non-concessional contributions. You don't have to take any action for these to be excluded.
You may be able to exclude personal contributions arising from a personal injury payment from counting towards your non-concessional contributions cap.
You can only use the exclusion for the part of the payment that is compensation or damages for your personal injury.
You must advise your fund that you are choosing (electing) to exclude the amount before or when you make the contribution. Otherwise, your fund must report the amounts as personal contributions.
Your election can be made in the approved Contributions for personal injury election form, although this is not compulsory. However, you must provide your fund with all the information required by this form.
There is no limit on the amount you can claim as a personal injury election amount, but there are strict conditions on the contributions you can claim the exclusion for.
If the exclusion doesn't apply to you, the amount will be treated as a normal personal contribution and count towards your non-concessional contributions cap.
Example: personal injury compensation
Bruce was injured in a car accident. As a result of his injury, he is not expected to ever work again in a role for which he is suited through education, training or experience. Two qualified medical practitioners have certified this.
Three years after his injury, Bruce receives $2 million from the insurers as a structured settlement of his claim. This amount is comprised of:
- $1.5 million compensation for personal injury
- $500,000 compensation for medical costs.
Bruce contributes $1.75 million to his super within 90 days of receiving the payment. He uses the remaining $250,000 to pay the debts he accrued for hospital stays and physiotherapy as a result of his injury.
Bruce can only choose (elect) to exclude $1.5 million of the contribution (the part of the payment which was compensation for the personal injury) from being counted towards his non-concessional cap. The remaining $250,000 will count towards his non-concessional cap.End of example
You may be able to choose (elect) to exclude personal contributions of amounts arising from a capital gains tax (CGT) event from counting towards your non-concessional contributions cap.
To make this election, the amount you contribute must arise from a capital gains event or a 'CGT look-through earnout right' and meet the requirements of either the:
If you contribute an amount arising from a CGT event to your super, it will not count towards your non-concessional contributions cap if you notify your fund using the Capital gains tax cap election form.
There is a lifetime cap on the amount you can contribute to your super under these exemptions without counting towards for non-concessional contributions cap (see CGT cap election).
You must provide this form to your fund before or at the time you make the contribution. Otherwise, your fund must report the amount as a personal contribution.
Use of this approved election form is not compulsory. However, you must provide your fund with all the information required by the form.
If the exclusion criteria for either exemption does not apply to you, the amount will be treated as a normal personal contribution. It will count towards your non-concessional contributions cap.
Example: super CGT cap election
Barry owned a small business for 33 years. When he was 72 years old, he started selling his business assets in preparation for retirement. He is eligible to use the small business 15-year exemption.
In the 2022–23 income year, Barry contributed to his super fund $550,000 of the capital proceeds he received from selling some of his eligible assets. At the same time, he notified his fund that he was electing to use $550,000 of his super CGT cap, under the small business 15-year exemption. This was to exclude the contribution from counting towards his non-concessional contributions for the year.
Barry's super CGT cap for the year is $1,650,000, reduced to $1,100,000 after his election to use $550,000 of his super CGT cap.End of example
Your super fund may receive compensation from a financial services provider if you received inappropriate financial advice, or if you paid fees but did not receive advice. The compensation may be a refund or reimbursement of adviser fees, or an amount to compensate for lost earnings. It may also include an interest component.
The compensation may count towards your contribution caps depending on your circumstances.
If the finance service provider paid the compensation to your super fund without your direction, the compensation will be a concessional contribution in the financial year the fund receives it.
The compensation will be a non-concessional contribution in the financial year it is received by the fund if it has been paid to your super fund and allocated to your account and either of the following applies:
- the compensation was paid to you, and you subsequently contributed it as a personal contribution to your super fund
- you directed the financial service provider to pay the compensation that was payable to you into your super fund.
However, it will be a concessional contribution to the extent that it is covered by a valid and acknowledged notice of intent to claim a deduction and is allowable as a deduction.
For technical guidance, see Super contribution caps in our Legal Database.
You can contribute an amount up to your existing superannuation contribution caps into your super fund to save for your first home under the first home super saver (FHSS) scheme.
Your FHSS contributions count towards your contribution caps for the year they were made. If you exceed your caps (even if you made contributions only for the purposes of the FHSS scheme), you could pay more tax. This will be separate to any tax you pay on the FHSS release amount.How super contributions are treated depends on whether they're before-tax (concessional) or after-tax (non-concessional).