Superannuation guarantee contributions are taxed at a flat 15% inside your super fund. Your employer pays 12% of your ordinary time earnings on top of your wages, and the fund deducts the 15% contributions tax before investing what’s left. That flat rate is well below the marginal income tax rate most workers pay on their salary, which is the whole point of the concession. It isn’t universal though: low-income earners effectively pay nothing, and high-income earners pay 30%.
The 15% Fund Tax and How It’s Collected
Employer SG payments are classed as concessional contributions, meaning they go into your fund before personal income tax has been assessed on them. Concessional contributions are taxed at 15% inside the fund.1Australian Taxation Office. Understanding Concessional and Non-Concessional Contributions
You never see a bill. Your fund deducts the 15% from each contribution as it arrives, remits it to the ATO, and invests the remaining 85%. It doesn’t appear on your personal tax return, and there’s nothing to lodge. The trade-off is that these amounts haven’t been taxed as personal income first, so the 15% inside the fund is what the tax system takes instead of your marginal rate.
The 12% SG rate applies from 1 July 2025 and stays at 12% from 2026–27 onward.2Australian Taxation Office. Super Guarantee It’s calculated on your ordinary time earnings, which covers standard working hours, over-award payments, and some allowances, but generally excludes overtime. Some awards and enterprise agreements require a higher percentage, so your employment terms are worth checking.3business.gov.au. Superannuation
When the Rate Rises to 30%: Division 293
If your combined income and concessional contributions exceed $250,000 in a financial year, an additional 15% tax applies to your concessional contributions, taking the total tax on those contributions to 30%.4Australian Taxation Office. Division 293 Tax on Concessional Contributions by High-Income Earners Even at 30%, that’s still below the top marginal rate of 45%, so super remains tax-advantaged for high earners.
The income figure used for Division 293 is broader than your taxable income. The ATO adds together your taxable income, reportable fringe benefits, net financial investment losses, net rental property losses, and other components, then adds your concessional contributions on top. The extra 15% only applies to the lesser of your concessional contributions or the amount by which you’re over the $250,000 threshold, so someone just above the line isn’t hit on every contributed dollar.
After you lodge your tax return and your fund reports your contribution data, the ATO issues a separate Division 293 assessment. You can pay it from your own money or authorise the ATO to release the amount from your super account. Most people choose the super release option so their cash flow isn’t affected.
When the Rate Drops to Zero: Low Income Super Tax Offset
Workers earning $37,000 or less get the 15% contributions tax refunded through the Low Income Super Tax Offset. The government pays up to $500 directly into your super account, calculated as 15% of your concessional contributions for the year.5Australian Taxation Office. Low Income Super Tax Offset The net effect is that low earners pay no tax on their SG contributions, which reflects the fact that they often pay little or no income tax on their wages either.
There’s nothing to apply for. The ATO works out eligibility automatically from your adjusted taxable income once you and your fund lodge annual reports, and the payment usually lands in your super account the following financial year. From 1 July 2027, the income threshold is scheduled to rise to $45,000 and the maximum payment to $810.6Treasury.gov.au. Low Income Superannuation Tax Offset
Other Contributions Taxed the Same Way
SG isn’t the only money that attracts the 15% fund tax. Two other types of contribution sit in the same concessional bucket and share the same treatment.
Salary Sacrifice
Salary sacrifice redirects part of your pre-tax pay into super, on top of the 12% SG. Those amounts are concessional and taxed at 15% in the fund. Because the redirected pay avoids your marginal income tax rate entirely, someone on 32.5% or 37% picks up a real tax saving.
Personal Deductible Contributions
If you make a personal after-tax contribution to your fund and then claim a deduction for it, the contribution becomes concessional. The fund taxes it at 15% and you claim the deduction on your personal return. To make this work, you must lodge a notice of intent to claim a deduction with your fund before you file your tax return or before the end of the following financial year, whichever comes first.7Australian Taxation Office. Notice of Intent to Claim a Deduction Miss the deadline and the contribution stays non-concessional, and you lose the deduction.
The $30,000 Concessional Cap
The concessional contributions cap for 2025–26 is $30,000, and it covers everything together: SG, salary sacrifice, and personal deductible contributions.8Australian Taxation Office. Contributions Caps Stay under it and everything is taxed at 15% (or 30% under Division 293). Go over it and the excess is added to your personal assessable income and taxed at your marginal rate. Because the fund already deducted 15% on the way in, you get a 15% tax offset to prevent double taxation.9Australian Taxation Office. Concessional Contributions Cap The practical result is that any excess is taxed at your marginal rate rather than 15%.
Two timing quirks catch people out. Contributions count toward the cap based on when your fund receives them, not when you earned the income, so a late-June employer payment that lands in July falls into the next year’s cap. And fund-charged fees, like administration costs and insurance premiums paid by your employer, count as concessional contributions and use up cap space you might not have thought about.
You can withdraw up to 85% of any excess from your fund to help pay the resulting tax bill. The 85% reflects the 15% the fund already withheld. If you leave the excess in, it counts toward your non-concessional cap for the year, which can create a second problem on top of the first.
Carrying Forward Unused Cap
If your total super balance was below $500,000 at the previous 30 June, you can carry forward unused concessional cap space from up to five prior financial years.9Australian Taxation Office. Concessional Contributions Cap Unused amounts expire after five years. It’s useful for people who’ve had career breaks or part-time years and want to make a larger concessional contribution in a high-income year while still paying only 15% on it.
After-Tax Contributions Aren’t Taxed Again
Money you put into super from your after-tax income without claiming a deduction is non-concessional. Because you’ve already paid income tax on it, the fund doesn’t tax it again on the way in. The annual cap for 2025–26 is $120,000.8Australian Taxation Office. Contributions Caps Exceeding this cap is expensive: the excess is taxed at your highest marginal rate.
If Your Employer Doesn’t Pay On Time
Until 30 June 2026, employers must pay SG quarterly, with each payment due 28 days after the end of the quarter, and the money must be received by the fund by the due date rather than simply sent.10Australian Taxation Office. Quarterly Super Payment Due Dates From 1 July 2026, the system shifts to payday super, requiring contributions to reach your fund within seven business days of each payday.11Australian Taxation Office. Payday Super
An employer who misses the deadline is liable for the superannuation guarantee charge, which has three components:12Australian Taxation Office. The Super Guarantee Charge
- The SG shortfall, calculated on total salary and wages including overtime rather than just ordinary time earnings
- Nominal interest at 10% per year, accruing from the start of the quarter
- A $20 per employee, per quarter administration fee
The broader calculation base is deliberate: the ordinary SG obligation excludes overtime, but the SGC captures it, so the shortfall is always larger than the original missed amount. The SGC isn’t tax-deductible for the employer, unlike normal SG contributions. Checking your contribution totals through myGov before 30 June each year is the simplest way to confirm that what your employer says they paid actually reached your fund.