Concessional vs Non-Concessional Contributions: The $150k+ Earner's Complete Strategy Guide

If you're earning over $150,000, you're likely in the second-highest or top marginal tax bracket. While that's great for your career and lifestyle, it also means you're potentially losing close to half your income to tax. The good news? Your superannuation strategy can be one of your most powerful wealth-building and tax-minimisation tools.

Understanding the difference between concessional and non-concessional contributions—and knowing how to leverage both strategically—can literally save you tens of thousands of dollars in tax while accelerating your path to a comfortable retirement. Let's break down everything you need to know.

Understanding Concessional Contributions

Concessional contributions are essentially pre-tax contributions to your super fund. They're called "concessional" because they receive concessional tax treatment—instead of being taxed at your marginal rate (which could be 37% or 45% plus Medicare Levy), they're taxed at just 15% when they enter your super fund.

For the 2025-26 financial year, the concessional contributions cap is $30,000. This includes your employer's compulsory superannuation guarantee contributions, any salary sacrifice arrangements you have in place, and any personal contributions you make and claim a tax deduction for.

Here's where the magic happens for high earners. Let's say you're earning $200,000 and you're in the 45% tax bracket (including Medicare Levy). If you salary sacrifice $20,000 into super, that money is taxed at 15% instead of 47%. That's an immediate tax saving of $6,400. Over a decade, maximising this strategy could save you over $60,000 in tax while building your retirement nest egg.

The Division 293 Tax Consideration

Before you get too excited, there's an important caveat for very high earners. If your income plus concessional contributions exceed $250,000, you'll pay an additional 15% tax on your concessional contributions through Division 293 tax. This means your effective tax rate on contributions becomes 30% instead of 15%.

But here's the critical point: 30% is still significantly better than 47%. Even with Division 293 tax, high earners are still saving 17 cents in every dollar contributed compared to taking it as salary. It reduces the benefit but doesn't eliminate it entirely.

Understanding Non-Concessional Contributions

Non-concessional contributions are after-tax contributions to your super. You've already paid your marginal tax rate on this money, so it enters your super fund without any additional contributions tax.

The annual non-concessional contributions cap for 2025-26 is $120,000. Additionally, if you're under 75 years old and haven't triggered the bring-forward rule in previous years, you can bring forward up to three years' worth of caps, allowing you to contribute up to $360,000 in a single year.

However, there's a catch. You can only make non-concessional contributions if your total superannuation balance is below $1.9 million on the previous June 30. Once you exceed this threshold, you can no longer make non-concessional contributions.

Why Non-Concessional Contributions Matter for High Earners

You might wonder why you'd contribute after-tax money to super when you don't get an immediate tax deduction. The answer lies in the tax treatment of earnings inside super versus outside super.

Inside your super fund, investment earnings are taxed at a maximum of 15% during accumulation phase, and 0% once you move into pension phase in retirement. Outside super, your investment earnings are taxed at your marginal rate—potentially 47% for high earners.

Let's run the numbers. If you invest $100,000 outside super and it earns 7% annually, you'll pay tax on that $7,000 gain at your marginal rate. At 47%, that's $3,290 in tax, leaving you with $3,710 in after-tax returns. The same investment inside super would be taxed at maximum 15%, leaving you with $5,950—a difference of $2,240 every single year.

Strategic Approach: Which Strategy Should You Use?

For most high earners, the optimal strategy follows this priority order:

First, maximise your concessional contributions up to the $30,000 cap. This provides immediate tax relief and is the most tax-effective strategy available. Even if you're subject to Division 293 tax, you're still ahead.

Second, ensure you're not wasting your employer contributions by having them count inefficiently toward your cap. Coordinate with your payroll team to optimise timing and amounts.

Third, if you have additional capital available and your super balance is below $1.9 million, consider non-concessional contributions. This is particularly powerful if you've received a bonus, inheritance, or property sale proceeds and want to shelter future earnings from high marginal tax rates.

Fourth, consider the bring-forward rule strategically. If you're approaching age 75 or expecting your super balance to exceed $1.9 million soon, bringing forward three years of contributions can lock in significant long-term tax advantages.

Cash Flow Considerations

The main limitation for high earners is often cash flow rather than contribution caps. Salary sacrificing $30,000 means $30,000 less in your take-home pay (though only about $15,900 less after accounting for tax savings). You need to ensure you can maintain your lifestyle and meet your non-super financial commitments.

Similarly, non-concessional contributions require significant after-tax capital. Before contributing $120,000 to super, ensure you have adequate emergency funds, manageable debt levels, and aren't compromising other important financial goals.

The Long Game

Remember, superannuation is preserved until you meet a condition of release—typically reaching age 60 and retiring, or reaching age 65. The trade-off for the tax benefits is reduced liquidity. Make sure you're not over-contributing at the expense of needing to access funds before retirement.

For high earners in their 40s and 50s, maximising both concessional and non-concessional contributions can be transformational. The combination of tax savings on contributions, tax-effective earnings, and compound growth over 15-25 years can result in hundreds of thousands of dollars in additional retirement capital.

Take Action

If you're earning over $150,000 and haven't optimised your superannuation contribution strategy, you're potentially leaving significant tax savings on the table. Review your current contributions, calculate your available cap space, and consider whether salary sacrificing or additional contributions align with your financial situation.

Every high earner's situation is unique, with different cash flow needs, investment goals, and retirement timelines. Working with a qualified financial adviser can help you develop a personalised strategy that maximises your tax efficiency while keeping you on track for your ideal retirement.

The question isn't whether you can afford to optimise your super strategy—it's whether you can afford not to.

General Advice Disclaimer

The information provided in this article is general in nature and does not take into account your personal financial situation, needs, or objectives. It is not intended to be, and should not be construed as, financial product advice, a recommendation, or an offer or solicitation concerning any financial product.

Before making any financial decision, you should consider whether the information is appropriate for your circumstances and consider seeking professional financial advice.