Concessional super contributions taxed at 15% vs. marginal rates: True for most earners, false for the highest earners
“Concessional superannuation contributions result in an effective tax rate of 15 percent versus marginal tax rates exceeding 30 percent for higher-income earners”
The argument in brief
Concessional superannuation contributions are taxed at 15% inside the fund, which is genuinely lower than the marginal rates of 34.5%–47% facing most higher-income Australians — but the claim is partially false because earners whose income plus concessional contributions exceed $250,000 pay an additional 15% Division 293 tax, bringing their effective super tax rate to 30%, not 15%, according to the ATO.
Data: ATO Individual Tax Rates and Division 293 rules, 2024
Why it spread
The 15% figure is the number financial planners, media, and the ATO itself lead with, because it applies to the vast majority of fund members. The comparison to high marginal rates is a genuinely compelling and largely accurate talking point for middle-to-high earners, so it circulates widely in financial advice content. Division 293 is a less-publicised rule that only affects a smaller group of very high earners, so it gets dropped from simplified summaries — leaving a clean, memorable statistic that is true enough for most people to go unchallenged.
The claim is that concessional superannuation contributions — employer contributions and salary sacrifice — are taxed at a flat 15% inside the fund, while higher-income earners face marginal tax rates above 30%, making super a significant tax shelter. This is partially true but materially incomplete: it accurately describes the position for most higher-income earners, but it is flatly wrong for the highest earners in Australia.
The core numbers are real. According to ATO Individual Income Tax Rates for 2023-24, the marginal rate is 32.5% for income between $45,001 and $120,000, 37% for $120,001 to $180,000, and 45% above $180,000. Add the 2% Medicare Levy and the effective marginal rates become 34.5%, 39%, and 47% respectively. The ATO confirms that concessional contributions — including the 11% superannuation guarantee — are taxed at 15% inside the fund for most members. The Australian Treasury's Tax Expenditures and Insights Statement 2023 put the total cost of this concession at approximately $21.5 billion in foregone revenue in 2022-23, confirming the concession is both real and substantial.
The claim breaks down at the top of the income scale. The ATO's Division 293 rules impose an additional 15% tax on concessional contributions for individuals whose combined income and concessional contributions exceed $250,000. That doubles the effective super tax rate from 15% to 30% for those earners. For someone on a 47% marginal rate, the concession is real — 17 percentage points — but it is not the 32-percentage-point gap the headline claim implies. The Parliamentary Budget Office's 2020 Distributional Analysis of Superannuation Tax Concessions specifically found the concession is largest for earners in the 37%–45% marginal bracket who sit below the $250,000 Division 293 threshold, not for the very highest earners.
To steelman the claim: for an earner on $150,000 — well within the top income quintile — the comparison is accurate. Their marginal rate including Medicare Levy is 39%, and their super contributions are taxed at 15%, a 24-percentage-point gap. The claim is a fair and useful description of how super works for this large group. What it gets wrong is treating that 15% figure as universal when a specific, named legislative carve-out — Division 293 — already existed to limit the concession for the highest earners.
The manipulation pattern here is selective use of the statutory headline rate. Citing "15%" without mentioning Division 293 is technically accurate for most earners but creates a false impression that the wealthiest Australians enjoy the same concession as everyone else. It also omits that low-income earners — those below roughly $37,000 — receive a Low Income Super Tax Offset that effectively refunds the 15% contributions tax, meaning the concession structure is more nuanced at both ends of the income scale than the simple claim suggests. When you see a tax comparison that uses a single rate for all "higher earners," check whether there is a threshold that changes the calculation for the very top — there usually is.
Sources
- Australian Taxation Office (ATO) - Concessional Contributions
Concessional superannuation contributions (employer and salary-sacrifice) are taxed at 15% within the fund, compared to the individual's marginal income tax rate. This is the standard rate for funds with assets under $3 million (ATO, 2024).
- Australian Taxation Office (ATO) - Individual Income Tax Rates 2023-24
For 2023-24, the marginal tax rate is 32.5% for taxable income $45,001–$120,000; 37% for $120,001–$180,000; and 45% for income above $180,000. The Medicare Levy of 2% applies on top, making effective marginal rates 34.5%, 39%, and 47% respectively (ATO, 2024).
- Australian Taxation Office (ATO) - Division 293 Tax
High-income earners with income plus concessional contributions exceeding $250,000 pay an additional 15% Division 293 tax on their concessional contributions, bringing their effective super tax rate to 30%, not 15% (ATO, 2024).
- Treasury - Tax Expenditures and Insights Statement 2023
The Australian Treasury estimated the tax concession on superannuation contributions cost approximately $21.5 billion in foregone revenue in 2022-23, confirming the concession is real and substantial, but noting it is less generous for very high earners due to Division 293 (Treasury, 2023).
- Parliamentary Budget Office - Distributional Analysis of Superannuation Tax Concessions (2020)
The PBO found that the superannuation tax concession is largest for middle-to-high income earners (marginal rate 37-45%) who are below the $250,000 Division 293 threshold, where the gap between the 15% contributions tax and their marginal rate is greatest (PBO, 2020).
- Australian Taxation Office (ATO) - Superannuation Guarantee
The superannuation guarantee rate is 11% of ordinary time earnings for 2023-24, rising to 11.5% in 2024-25 and 12% by 2025-26. These mandatory employer contributions are also taxed at 15% in the fund (ATO, 2024).