Superannuation remains one of the most powerful tools for building long-term wealth and securing a comfortable retirement in Australia. With changing contribution caps and tax rules, understanding how to maximise your super contributions—and minimise tax—is essential. Whether you’re a high-income earner, a couple planning jointly, or simply looking to make the most of your after-tax savings, this guide will walk you through everything you need to know for the 2025–26 financial year.
What Are Superannuation Contributions?
Superannuation contributions are payments made into your super fund to help you save for retirement. A simple example: if you earn $50,000 in a year, then under the current 2025–26 financial year rules, your employer must contribute 12% of your salary—i.e., $6,000—into your designated super account. This amount, along with investment returns, will accumulate over time and be available to you upon retirement as tax-free income.
These contributions fall into two main categories:
Concessional contributions: Made from pre-tax income (e.g., employer SG payments, salary sacrifice, or deductible personal contributions)
Non-concessional contributions: Made from after-tax income (e.g., personal savings or inheritance)
Each type has its own cap, tax treatment, and strategic benefits. However, Concessional contributions are tax-effective and help boost retirement savings.
Annual Cap for 2025–26: concessional contributions
The concessional contributions cap is $30,000 per financial year. This includes employer contributions, salary sacrifice, and personal contributions claimed as a tax deduction. In the earlier example, your employer contributes $6,000, leaving you with $24,000 available for additional concessional contributions via salary sacrifice or personal deductible contributions.
Tax Treatment
Concessional contributions are taxed at 15% inside your super fund. If we go back again to the above example, your employer has contributed to your super fund $6,000. After receiving the amount, your super fund will deduct 15% tax which is $900. And the remaining $5,100 will be invested for your future.
Carry-Forward Rule
If your total super balance is under $500,000, you can carry forward unused concessional cap amounts for up to five years. This allows you to make larger contributions in future years without breaching the cap.
As explained above, your concessional superannuation contribution cap for the 2025–26 financial year is $30,000. If your employer contributes $6,000 and you make no additional contributions through salary sacrifice or personal deductible contributions, then the unused concessional cap for that year is $24,000.
This unused amount doesn’t go to waste. Under the carry-forward rule, you can accumulate and use any unused concessional cap amounts for up to five years, provided your total super balance remains below $500,000 at the end of the previous financial year. This strategy allows you to make larger contributions in future years without exceeding the cap—ideal for those with fluctuating income or planning lump-sum contributions.
However, if your income plus concessional contributions exceeds $250,000, you may pay an additional 15% Division 293 tax on the excess portion. This brings the total tax on that portion to 30%.
Division 293 Tax: What High-Income Earners Need to Know
Division 293 tax is designed to make super tax concessions more equitable by applying an additional 15% tax on concessional contributions for individuals earning over $250,000.
How Division 293 tax Works
Division 293 tax applies to the lesser of:
a) The amount over the $250,000 threshold
b) Your total concessional contributions
Example
If your income is $270,000 and you contribute $25,000:
- Total income including contribution is = $295,000
- Excess over $250,000 = ($295,000 – $250,000) $45,000
- Division 293 tax applies to $25,000 (the lesser amount between $45,000 and $25,000)
- You pay an extra $3,750 in tax (15% of $25,000)
Annual Cap for 2025–26: Non-Concessional Contributions
The non-concessional contributions cap is $120,000 per year.
If you’re under 75 and your total super balance is below $1.9 million, you can use the bring-forward rule to contribute up to $360,000 over three years.
For example, let’s say you’ve already maximised your concessional superannuation contributions for the financial year. If you’d like to contribute more to your super fund to strengthen your retirement savings, you can make non-concessional contributions of up to $120,000 per year.
These contributions are made from after-tax income, which means you don’t receive the 15% tax concession that applies to concessional contributions. That’s why they’re referred to as non-concessional. However, even though they don’t offer immediate tax benefits, they still grow tax-effectively within your super fund—and are subject to the annual cap mentioned earlier.
Tax Treatment
There is no tax on entry into super (since it’s already taxed income). Earnings within super are taxed at 15%. Exceeding the cap may result in penalty tax of up to 47%, unless withdrawn.
Restrictions
If your total super balance is $2 million or more, your non-concessional cap becomes $0—meaning you cannot make further non-concessional contributions.
Spouse Strategies: Super Planning for Couples
Superannuation planning can be even more effective when done jointly with your spouse. Here are three key strategies:
Spouse Contributions: You can contribute to your spouse’s super fund. If your spouse earns less than $40,000 in a year, you may receive a tax offset of up to $540.
Example
Let’s say:
- You contribute $3,000 to your spouse’s super fund.
- Your spouse earns $37,000 in the financial year.
- You meet all eligibility criteria (e.g., both are Australian residents, your spouse is under 75, and the contribution is not tax-deductible).
In this case, you may be eligible for a tax offset of 18% on your contribution:
- 18% of $3,000 = $540 tax offset
This offset directly reduces your tax payable, making it a smart strategy for couples managing finances together.
Contribution Splitting: You can split up to 85% of your concessional superannuation contributions with your spouse. This helps balance super balances and may reduce future tax liabilities.
Example
Let’s say:
- You earn a salary and your employer contributes $10,000 to your super as concessional contributions.
- You decide to split 85%, which is $8,500, into your spouse’s super fund.
- Your spouse earns less or has a lower super balance.
This helps:
- Boost your spouse’s retirement savings
- Potentially reduce your own taxable income in retirement
- Improve access to superannuation if your spouse reaches retirement age earlier
Bring-Forward Rule for Couples: Each spouse has their own non-concessional cap. If one partner is close to the $2 million balance limit, contributing to the other’s super can help continue building retirement savings tax-effectively.
Strategic Tips to Maximise Superannuation Contributions
a) Use salary sacrifice to stay within concessional caps and reduce taxable income.
b) Track your total super balance to avoid breaching non-concessional limits.
c) Use the carry-forward rule if you’ve had lower contributions in past years.
d) Consider spouse contributions to claim tax offsets and balance retirement savings.
e) Review your income annually to assess Division 293 tax exposure.
Conclusion
Understanding the rules around superannuation contributions—including concessional and non-concessional caps, Division 293 tax, and spouse strategies—is key to building a strong retirement fund while minimising tax. With the right planning, you can take full advantage of the generous tax concessions available and ensure your financial future is secure. Start reviewing your contribution strategy today or consult a financial advisor to tailor a plan that’s right for you.
DISCLAIMER: The information provided in this guide is general in nature only and does not constitute personal financial, taxation, or legal advice. It has been prepared without taking into account your individual objectives, financial situation, or needs. Before acting on any information, you should consider the appropriateness of the information to your own circumstances and seek advice from a qualified financial adviser, tax agent, or legal professional.
