EOFY Superannuation Strategy: Making the Most of Concessional Contributions
As the end of the financial year approaches, many Australians are looking for ways to reduce their tax bill while boosting their retirement savings. One of the most effective strategies available is making concessional (before-tax) contributions to superannuation.
What Are Concessional Contributions?
Concessional contributions are contributions made to your superannuation from pre-tax income. They generally include:
Employer Superannuation Guarantee (SG) contributions
Salary sacrifice contributions
Personal contributions for which you claim a tax deduction
These contributions are typically taxed at just 15% within the superannuation environment, which can be significantly lower than many individuals' marginal tax rates.
Why Consider Additional Contributions Before 30 June?
Making additional concessional contributions before the end of the financial year may provide two key benefits:
1. Reduce Your Taxable Income
If you make a personal deductible contribution or salary sacrifice additional amounts into super, you may be able to reduce your taxable income and potentially pay less income tax.
For example, someone earning $120,000 who makes a $10,000 deductible super contribution may reduce their taxable income to $110,000, while benefiting from the concessional tax treatment within super.
2. Grow Your Retirement Savings
In addition to the immediate tax benefits, concessional contributions help build your retirement savings in a tax-effective environment where investment earnings are generally taxed at a maximum rate of 15%.
Understanding the Contribution Limits
For the 2025-26 financial year, the concessional contribution cap is $30,000.
Importantly, this cap includes all employer contributions, salary sacrifice contributions and any personal deductible contributions made during the year.
Exceeding the cap may result in additional tax consequences, so it is important to monitor total contributions carefully.
Don't Forget About Carry-Forward Contributions
Some individuals may be able to contribute more than the standard annual cap by using unused concessional contribution caps from previous financial years.
To be eligible:
Your total superannuation balance generally needs to be less than $500,000 as at the previous 30 June.
You must have unused concessional contribution cap amounts available from the previous five financial years.
This strategy can be particularly valuable for individuals who have received a bonus, sold an investment, or experienced a higher-than-usual income year.
Looking Beyond the Annual Cap: Catch-Up Concessional Contributions
Many Australians are unaware that they may be able to contribute significantly more than the standard concessional contribution cap through the catch-up concessional contribution rules.
Introduced to provide greater flexibility, these rules allow eligible individuals to carry forward unused portions of their concessional contribution caps from previous financial years and use them at a later date.
Who Can Benefit?
To utilise catch-up concessional contributions, your total superannuation balance must have been less than $500,000 as at the 30th June of the previous financial year.
If eligible, you may be able to access unused concessional contribution cap amounts from the previous five financial years.
This strategy can be particularly valuable for:
Professionals receiving a bonus or promotion.
Business owners experiencing a particularly profitable year.
Individuals returning to the workforce after parental leave.
People who have recently received an inheritance or sold an investment asset.
Pre-retirees looking to boost their retirement savings while reducing tax.
Why It Can Be So Powerful
Many people do not fully utilise their concessional contribution cap each year. Rather than losing that opportunity permanently, the unused cap amount may accumulate and become available for future use.
This can create a significant tax planning opportunity.
For example, an individual who has consistently received only employer super contributions may have accumulated tens of thousands of dollars of unused concessional cap space over several years. If they subsequently receive a large bonus or experience a higher-income year, they may be able to make a substantial deductible super contribution and claim a corresponding tax deduction.
Example: Catch-Up Contributions in Action
Michael earns $180,000 and has accumulated $40,000 of unused concessional contribution cap amounts from previous financial years.
Following the sale of an investment property, he expects a higher taxable income this year and decides to contribute an additional $40,000 to super using his available catch-up concessional cap.
As a result:
He increases his retirement savings in a tax-effective environment.
He reduces his taxable income for the financial year.
He takes advantage of contribution opportunities that would otherwise have been lost.
For many Australians approaching retirement, catch-up contributions represent one of the most effective strategies available to accelerate superannuation savings while managing tax obligations.
EOFY Is the Perfect Time to Review Your Available Cap
The weeks leading up to 30 June provide an ideal opportunity to review your concessional contribution position, including:
Employer contributions already received during the year.
Any salary sacrifice arrangements in place.
Available concessional contribution cap space.
Eligibility for catch-up concessional contributions.
A review of your contribution history may reveal opportunities to contribute more to super than you initially thought possible.
Timing Matters
Superannuation contributions must be received by your super fund before 30 June to count toward the current financial year. As processing times can vary between super funds and financial institutions, leaving contributions until the final days of June can create unnecessary risk. We recommend allowing sufficient time for contributions to be processed before the financial year ends.
Case Study: How Denise Uses Concessional Contributions to Build Wealth
Denise is 45 years old and earns a salary of $100,000 per year, plus employer superannuation contributions.
Under the current Superannuation Guarantee rate of 12%, her employer contributes $12,000 to super during the financial year.
This means Denise still has $18,000 of her $30,000 concessional contribution cap available.
After reviewing her financial position with her adviser, Denise decides to make a personal deductible contribution of $18,000 before 30 June.
Immediate Tax Benefit
As Denise's marginal tax rate is 30% plus the 2% Medicare Levy, she would ordinarily pay tax of 32% on this income.
By contributing the $18,000 to super and claiming a tax deduction:
Denise reduces her taxable income from $100,000 to $82,000.
She saves approximately $5,760 in personal income tax.
The contribution is taxed at only 15% within super, resulting in contributions tax of $2,700.
Her net tax benefit is approximately $3,060.
The Long-Term Benefit
While the immediate tax saving is attractive, the real value comes from allowing those additional funds to remain invested for the long term.
If Denise leaves the additional $18,000 invested in super until age 67 and earns an average annual return of 7%, that single contribution could grow to approximately: $74,000 over the next 22 years.
In other words, a decision made before 30 June could potentially add more than $56,000 of investment growth to Denise's retirement savings, in addition to the initial tax benefits received today.
The Bigger Picture
Many Australians focus on the short-term tax deduction, but concessional contributions can be even more powerful when viewed as a long-term wealth creation strategy.
Regularly maximising available concessional contribution caps can significantly improve retirement outcomes by combining:
Immediate tax savings;
Tax-effective investment growth; and
The power of compounding over time.
For investors with surplus cash flow or available savings, the period leading up to 30 June can be an ideal opportunity to review contribution limits and determine whether additional concessional contributions could help accelerate progress towards their retirement goals.
Is This Strategy Right for You?
Concessional contributions can be a powerful way to improve your long-term financial position while potentially reducing tax. However, the benefits will depend on your personal circumstances, income level, cash flow needs and contribution history.
As part of your end-of-financial-year planning, it may be worthwhile reviewing your contribution levels and available contribution caps to determine whether additional concessional contributions could help you achieve your financial goals.
If you would like assistance calculating your available contribution cap or determining the most appropriate contribution strategy, please contact our office.