Concessional contributions and non-concessional contributions- what will change from July 2026?
Based on indexations tied to Average weekly ordinary time earnings (AWOTE), the concessional contributions cap, non-concessional contributions cap, and bring-forward cap have been updated since July 2026.
Let’s understand what each key contribution signifies and how changes in AWOTE affect the super contributions.
AWOTE
AWOTE stands for Average weekly one-time earnings, and it is calculated by the Australian Bureau of Statistics.
It shows the Average weekly one-time earnings of full-time employees for ordinary working hours and doesn’t include overtime.
AWOTE is used to track wage growth trends in Australia, calculate superannuation contributions, and conduct overall economic and policy analysis.
What are concessional contributions?
Concessional contributions are contributions made to Super from pre-tax income. Superannuation Guarantee contributions, salary sacrifice and other personal contributions claimed under tax deduction fall under concessional contributions.
The concessional contribution cap was $30,000 and will increase to $32,500 from July 2026.
These contributions are taxed at 15% within super, compared to a marginal tax rate of 47% outside super.
What are non-concessional contributions?
Non-concessional contributions include super contributions made with after-tax money. Contributions made from a savings account or transferred from the bank accounts fall under this category.
The annual cap for non-concessional contributions will be increased to $130,000 from $120,000 from July 2026.
This contribution doesn’t attract any additional tax, as tax is already paid before entering the super.
What is the bring-forward rule?
Under the bring-forward rule, two additional years of contributions are brought forward and made as a lump-sum contribution to super.
Incidents such as receiving a lump sum through inheritance or closing a savings account fall into this category.
The annual cap for non-concessional bring-forward (3 financial years) will increase to $390,000 from $360,000 from July 2026.
While all these contributions caps are indexed to AWOTE, the Transfer cap balance is indexed to CPI-linked changes.
All these changes to contributions help investors save more in a tax-effective way, improve tax-efficient investing, and build stronger retirement funds.
With more upcoming changes in the SMSF landscape, the need to track, interpret and apply the changes to every client increases.
Also, recalculating and updating values might increase the occurrence of errors.
It’s now time for accounting firms to focus on meeting their clients’ advisory expectations while guiding them strategically on what to do next.
