As yet another financial year is about to end and we look for opportunities to enhance our financial wellbeing, there is one strategy that can sometimes be overlooked. That being a “Catch Up Concessional Contribution.”
What is a ‘catch up’ concessional contribution?
It used to be a case of ‘use it or lose it.’ If you couldn’t contribute the maximum annual concessional (before-tax) contribution amount to your superannuation in a financial year, the opportunity was lost.
This meant many people, had a lower super balance for their retirement. This was typically a result of their working life being interrupted by things like studying, starting a family or taking care of parents. This could also be the outcome from working in casual or part-time jobs.
However, from 1 July 2018, eligible individuals started to accumulate unused concessional contributions and carry these forward. From 1 July 2019, they were able to start making use of those carried-forward amounts.
Can I make concessional contributions?
An annual cap of currently $27,500 applies to concessional contributions. This is the most you can contribute in one year.
Concessional contributions include:
- mandatory employer contributions (such as Super Guarantee)
- salary sacrifice contributions (paid from your salary before it’s taxed), and
- personal contributions that you claim a personal tax deduction for.
If your concessional contributions in a year (starting from 1 July 2018) are less than the annual cap for that year the ‘unused’ amount can be carried forward for the next five financial years. After five years, that unused amount will expire.
For example, if you have made total concessional contributions of $10,000 out of the available $25,000 in the 2020/21 financial year, the unused amount of $15,000 could be carried forward for the next five years. If you’re eligible, this could enable you to make a greater concessional contribution in a future year.
If you’re aged between 67and 74 you’ll need to meet a work test to make concessional contributions – you need to have done at least 40 hours of paid work in any consecutive 30-day period that financial year. You can’t make voluntary concessional contributions once you reach age 75.
Can I make catch up contributions?
So, you have an unused amount that you have carried forward from an earlier year, and you want to make a ‘top up’ carry-forward contribution. What now?
You will need to look at your ‘total super balance’ (TSB). Your TSB at the 30 June prior to a contribution being made must be less than $500,000 for you to be eligible to make the catch-up contribution using your carried forward amount.
Your total super balance at a particular time is broadly the total of the:
- accumulation phase value of your super interests
- value of your super pension accounts
- rollovers in transit between super funds.
You can find your balance by contacting your fund or funds, and you’ll also find the latest balances reported to the Australia Taxation Office through the MyGov online services.
If you think this may have some applicability to you consult one of the team members at HLB Wealth Pty Ltd on (08) 9227 7500.
This article first appeared in the Winter 2022 issue of HLB Mann Judd Perth’s Client Alert.
Peter Speechley (ASIC No.246156) and HLB Wealth Pty Ltd (ASIC No. 428645) are Authorised Representatives of Paragem Pty Ltd ABN 16 108 571 875, AFSL 297276
The information contained in this article has been provided as general advice only. The contents have been prepared without taking account of your personal objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned in this article, consult your financial advisor to consider whether that is appropriate having regard to your personal objectives, financial situation and needs.