27 Sep 2022
How catch-up concessional contributions work
If you’ve had interrupted income, or just haven’t been in a position to put as much into super as you’d like, catch-up concessional contributions may provide an opportunity to top up at a more convenient time.
You won’t always be in a position to put money into your super. You might be taking time off work to study or care for children, or you might have other financial commitments you’re prioritising such as paying the mortgage.
However, should the time arise when you can, and want to contribute more to your retirement savings, you may be eligible to make catch-up concessional contributions.
This is where, if you make or receive concessional super contributions that are less than the annual concessional contributions cap (currently $27,500), you could accrue unused cap amounts for up to five years.
What are concessional contributions?
Concessional contributions (which count toward your concessional contributions cap) include:
- Compulsory SG contributions, which are the before-tax contributions your employer is required to make into your super fund under the super guarantee, if you’re eligible.
- Voluntary salary sacrifice contributions, which are additional contributions you can get your employer to make into your super fund out of your before-tax income, if you choose to.
- Voluntary tax-deductible contributions, which are contributions you can make (such as when you transfer funds from your bank account into your super) that you then claim a tax deduction for.
Concessional contributions get special tax treatment, which for most people means you’ll generally pay less tax on your super contributions than you do on any income you receive.
What are the rules around catch-up concessional contributions?
To be eligible to make catch-up concessional contributions the following must apply, noting that catch-up concessional contributions can be made on top of the annual concessional contributions cap ($27,500).
- Your total super balance needs to be less than $500,000 on 30 June of the previous financial year. Note, your total super balance is broadly the sum of all your super accounts including pensions.
- You can only carry forward unused concessional contribution cap amounts from 1 July 2018.
- Unused cap amounts can only be carried forward for five years until they expire.
How could catch-up concessional contributions benefit me?
If you’ve spent time out of the workforce, or haven’t had the money to contribute as much as you’d like to, the rules may give you the ability to make larger, and or additional, concessional contributions than you’d otherwise be able to make, and at a time that’s more convenient for you.
If you’re approaching retirement and are looking at ways to potentially maximise your retirement savings while minimising tax through the system, catch-up contributions could also give you some flexibility.
How do super bring-forward rules differ?
If you’re under age 75 at the start of the tax year, you might also be able to make up to three years’ worth of non-concessional super contributions in a single income year, if you’re eligible.
This means you may be able to put in up to three times the non-concessional annual cap of $110,000, which means you may be able to top up your super by $330,000 within the same financial year.
Note, non-concessional contributions are different to concessional contributions and there are rules you’ll want to be across.
What other things should you know
- The value of your investment in super can go up and down, so before making extra contributions, make sure you understand, and are comfortable with, any potential risks.
- The government sets general rules around when you can access your super, which typically won’t be until you reach your preservation age (which will be between 55 and 60, depending on when you were born) and meet a condition of release, such as retirement.
If you have any questions or your personal circumstances have changed please do not hesitate to contact your financial adviser.
Any advice included in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs.
