All concessional super contributions are taxed at 15% inside the fund — this is the core of how super’s tax advantage works. This rate is lower than the marginal income tax rate for most workers, creating a net tax saving on every dollar contributed.
Key Takeaways
- All concessional contributions — employer SG, salary sacrifice, personal deductible — are taxed at 15% inside your fund
- This rate is far below the 32.5–47% marginal rates paid by most working Australians
- Division 293 adds another 15% (total 30%) if income plus concessional contributions exceeds $250,000
- The annual concessional cap is $30,000 for FY2025–26 — across all sources combined
- The LISTO (Low Income Super Tax Offset) refunds up to $500 of contributions tax for those earning under $37,000
What Are Concessional Contributions?
Concessional contributions are pre-tax contributions — they include:
- Employer SG contributions (12% from 1 July 2025)
- Salary sacrifice contributions
- Personal contributions for which a tax deduction is claimed (via a s.290 Notice of Intent)
The annual concessional cap is $30,000 in FY2025–26.
How the 15% Tax Works
When concessional contributions are received by your super fund, the fund pays 15% contributions tax to the ATO on each dollar received. This occurs at the fund level — you do not personally pay this tax directly.
Example:
- Employer contributes $12,000 (12% SG on $100,000 salary)
- Fund deducts 15% tax: $12,000 × 15% = $1,800
- Net amount credited to your account: $10,200
The effective tax rate of 15% compares favourably to income tax rates:
- On a salary of $80,000, your marginal rate is 32.5% + 2% Medicare = 34.5%
- Tax saving per dollar of salary sacrifice = 34.5% − 15% = 19.5 cents
This is why concessional contributions — whether via SG or salary sacrifice — are one of the most tax-effective strategies available to Australian workers.
Division 293 Tax — Higher Tax for High Earners
For individuals whose income plus concessional contributions exceed $250,000 in a financial year, an additional Division 293 tax of 15% applies to the contributions (or the amount that exceeds the threshold, whichever is lower).
Example:
- Salary: $240,000
- Concessional contributions: $30,000
- Total: $270,000 — exceeds $250,000 by $20,000
- Division 293 tax = $20,000 × 15% = $3,000
This brings the effective tax rate on those contributions from 15% to 30%. Division 293 assessments are issued by the ATO after your tax return is lodged — you can pay from your super fund or from personal funds.
See Division 293 Tax for the full calculation method.
LISTO — Low Income Earners Pay Zero Tax
For members whose income is below $37,000, the Low Income Super Tax Offset (LISTO) effectively refunds the 15% tax paid on concessional contributions — up to $500 per year. The ATO pays this directly to the super account.
Effect: Low-income earners effectively pay 0% tax on concessional contributions up to $37,000 income, making super even more attractive than cash savings for this group.
See LISTO — Low Income Super Tax Offset Explained.
Effective Tax Rates on Concessional Contributions by Income
| Annual Income | Marginal Rate (incl. Medicare) | Contributions Tax | Div 293 | Net Super Rate | Tax Saving vs Income |
|---|---|---|---|---|---|
| $20,000 | 19% + 0% | 15% → 0% (LISTO) | No | 0% | 19 cents/$ |
| $50,000 | 32.5% + 2% | 15% | No | 15% | 19.5 cents/$ |
| $90,000 | 32.5% + 2% | 15% | No | 15% | 19.5 cents/$ |
| $150,000 | 37% + 2% | 15% | No | 15% | 24 cents/$ |
| $200,000 | 45% + 2% | 15% | Yes (some) | ~30% | ~17 cents/$ |
| $280,000+ | 45% + 2% | 15% + 15% Div293 | Yes (all CCs) | 30% | ~17 cents/$ |
For most working Australians, the tax saving on concessional contributions is between 17–25 cents in every dollar — a significant advantage that compounds over a working life.
Frequently Asked Questions
Does the 15% tax come out of my contributions or the fund’s pocket? Your fund deducts the 15% from the contributions before crediting them to your account — it effectively reduces the amount credited to you.
Is the 15% tax rate guaranteed to stay? The concessional tax rate of 15% has been stable for decades, but it is set by legislation and could theoretically change. The Division 296 tax (on balances over $3M, from 1 July 2025) is an example of the tax treatment evolving over time.
What if I’m on a marginal rate below 19%? At very low incomes (below the tax-free threshold), your marginal rate may be lower than 15%. In this case, concessional contributions are still taxed at 15% inside the fund — but the LISTO offsets this for incomes under $37,000.
For further reading: Concessional Contributions — Complete Guide, Salary Sacrifice Super Explained, Super Tax Australia — Complete Guide. For advice tailored to your situation, speak with a licensed financial adviser through MoneySmart.