In short

Defined benefit super funds must calculate a notional taxed contribution for each member each year, a deemed (non-cash) amount that counts toward the concessional contributions cap. Because it's often hidden in footnotes and reported to the ATO months late, DB members can unknowingly breach the $32,500 cap through the notional figure alone, especially when combined with a second job's Super Guarantee contributions.

For most working Australians, the concessional contributions cap is straightforward arithmetic. The cap for 2026–27 is $32,500. Employer Super Guarantee contributions, salary sacrifice, and personal deductible contributions all count toward it. The member can see each contribution, can model the running total, and can adjust salary sacrifice mid-year to stay within the cap.

For members of defined benefit super funds, the picture is materially different — and easier to misjudge.

What is the notional taxed contribution?

The notional taxed contribution. Defined benefit funds work fundamentally differently from accumulation funds. There is no individual member balance that grows with contributions and earnings; instead, the fund accrues a benefit obligation, and the member's eventual pension or lump sum is calculated by formula at retirement. To bring DB members into the same concessional contributions framework as accumulation members, the law requires the fund's actuary to calculate a notional taxed contribution for each member each year. This is a deemed amount — not a cash flow — that represents the value of the benefit accrued during the year.

The notional taxed contribution counts as a concessional contribution and consumes the member's CC cap. Even when the member sees no contribution flow on their payslip and the fund makes no separately identifiable cash deposit to a member account, the notional amount applies for cap purposes.

Why do members miss it?

Why members miss it. DB fund member statements are not always explicit about the notional contribution. Many show only the benefit accrual or the projected benefit at retirement; the notional contribution figure may be in a footnote or appendix. The amount is reported by the fund to the ATO after year-end, with a several-month delay before it appears on the member's myGov record. By the time the member sees the figure, the year is over and any salary sacrifice decisions are locked in.

The result: many DB members assume their CC cap is fully available for cash contributions — salary sacrifice, personal deductible — when in fact a substantial portion is already consumed by the notional figure they don't easily see.

Which schemes are affected?

Which schemes are affected. The notional taxed contribution rules apply to closed and open DB schemes alike — PSS (closed to new members in 2005, but still has accruing members), CSS (closed in 1990), MilitarySuper (closed in 2016), DFRDB (closed in 1991), various state public sector schemes (NSW, Queensland, Victoria — variable rules, with some constitutionally protected funds following different rules), and corporate DB schemes that many large companies retain for legacy members.

A specific exception: members of constitutionally protected funds — some state schemes — have the notional contribution capped at the CC cap level, meaning the excess contributions tax does not apply at the member level on the DB component. Confirming the scheme's status is the first step in any DB-aware planning conversation.

How big is the trap?

The size of the trap. For a senior public servant on $200,000 salary near the end of a long career, the notional taxed contribution can reach $30,000 to $50,000. At the higher end of that range, the notional contribution alone exceeds the CC cap, and any additional cash contribution — including the member's own SG from continued work — produces excess contributions.

For mid-career members in their 40s with lower salaries, the notional figure is typically smaller. But the risk increases steadily with age, salary, and tenure in the scheme.

What is the continuing-work scenario?

The continuing-work scenario. The trap bites most acutely when a DB member also takes on a second income source. The classic scenario:

A retired senior public servant draws their PSS pension. They are still a member of the PSS fund — the pension is paid by the fund. They take on a part-time consulting role, and the new employer pays SG to a different super fund (their own SMSF, or a retail accumulation fund). The member assumes the SG counts toward the $32,500 cap, which it does. What the member may not realise is that the PSS fund continues to attribute a notional contribution as well — and that the combined SG plus notional contribution can exceed the cap.

The same scenario applies in reverse: a still-working DB member taking on a second job, where the second employer's SG is added to the notional contribution from the DB scheme. The cap is breached without any deliberate decision.

What happens if the cap is exceeded?

Excess contributions tax. When the cap is exceeded, the excess concessional contributions are treated as included in the member's assessable income at marginal rate, with a 15% credit for tax already paid by the fund. The member can elect to have up to 85% of the excess refunded out of super, leaving the remaining 15% as a permanent tax cost. The member also bears a notice from the ATO and a compliance burden for the year.

For high-income DB members, Division 293 adds a further 15% on concessional contributions above the threshold ($250,000 income + concessional contributions). A senior DB member with a large notional contribution and high income may face Div 293 even with no cash contribution at all.

What strategies help manage the cap?

Strategies to manage the cap. Several practical responses:

Find the number. Request the current and projected notional taxed contribution from the fund — not just the ATO record, which is too lagged. Most DB funds will provide an estimate on member or adviser request.

Calibrate salary sacrifice. Set salary sacrifice (and personal deductible contributions) after the notional contribution is known, not before. The starting point is the notional figure; cash contributions fill the remaining cap.

Use NCC capacity instead. If additional contribution is desired but the CC cap is consumed, non-concessional contributions — after-tax contributions, subject to the $130,000 annual cap and bring-forward rules — can supplement without consuming CC cap.

Reserve from second jobs. A DB member starting a part-time role should be briefed before SG begins. In some cases, restructuring the engagement (contract through own company, with a different contribution strategy) can avoid the cap exposure.

Lodge the 85% election if needed. If the cap is exceeded despite planning, the excess refund election should be lodged within the deadline. Don't let the excess become permanent.

Confirm CPF status. For state DB members, confirming whether the scheme is constitutionally protected can change the analysis entirely — for some schemes, the notional contribution is capped, and the trap doesn't apply.

What is the practical message for DB members?

The practical message. Defined benefit super is one of the most generous retirement income products ever offered to Australian workers. Members of PSS, CSS, MilitarySuper, and similar schemes typically have larger and more secure retirement incomes than equivalent accumulation-only members. But the notional contribution rules mean DB members must approach the contributions cap differently. The default assumption — "I have a $32,500 cap, I can salary sacrifice on top of my SG" — does not apply, and the cost of getting it wrong can be a permanent tax burden plus a Division 293 letter at the wrong end of a career.

The good news: the analysis is solvable. Request the notional figure from the fund, set salary sacrifice within the remaining capacity, use NCC capacity for additional saving, and confirm the scheme's grandfathering status. None of those steps is complicated. They just need to be done.

Sources

Key takeaways

  • A defined benefit fund's actuary calculates a notional taxed contribution for each member each year — a deemed amount, not a cash flow — that counts fully toward the concessional contributions cap.
  • The figure is often buried in footnotes on member statements and reported to the ATO months after year-end, so many DB members don't see it until decisions are already locked in.
  • For a senior public servant near the end of a long career, the notional taxed contribution alone can reach $30,000-$50,000, potentially exceeding the $32,500 cap with no cash contribution at all.
  • The trap bites hardest for DB members with a second income source — the second job's Super Guarantee is added on top of the notional contribution, often breaching the cap without any deliberate decision.
  • Members of constitutionally protected funds may have the notional contribution capped at the CC cap level, so confirming a scheme's status is a key first step in any DB contribution planning.

Frequently asked questions

What is a notional taxed contribution?

It's a deemed (non-cash) amount that a defined benefit fund's actuary calculates each year for each member, representing the value of the benefit accrued during that year. It counts fully as a concessional contribution and consumes the member's contributions cap, even though no cash contribution flow is visible to the member.

Why do defined benefit members often miss this in their planning?

Member statements often don't clearly show the notional contribution — it may be in a footnote or appendix — and the fund reports the figure to the ATO several months after year-end. By the time it appears on myGov, the financial year is over and salary sacrifice decisions are already locked in.

How does the trap affect a retired defined benefit member taking on part-time work?

The defined benefit fund keeps attributing a notional taxed contribution even after the member starts drawing their pension if they remain a fund member. If the member also takes on part-time work, the new employer's Super Guarantee is added to that notional contribution, and the combined total can breach the cap without any deliberate contribution decision.

What can a defined benefit member do to avoid breaching the cap?

Request the current notional taxed contribution figure directly from the fund rather than relying on the lagged ATO record, calibrate any salary sacrifice or personal deductible contributions around that figure, use non-concessional contribution capacity for additional saving instead, and confirm whether the scheme is constitutionally protected.

A note on advice. This article is general information only and doesn't account for your personal circumstances. Everyone's situation is different — before acting, it's worth talking it through with a licensed adviser who knows your full picture.