Rules around super contributions

Making ‘catch-up’ contributions to your superannuation account can boost your savings for long term financial security.

Rules around super contributions allow certain individuals to increase their superannuation by making additional concessional (before tax) contributions.

This scheme provides flexibility for eligible individuals to make ‘catch up’ concessional contributions to their superannuation when they have the capacity to do so. It’s particularly targeted at:

people who take time out of work, work part time or have irregular income
women who may have interrupted work patterns and generally lower super account balances than men
individuals who take a break from the workforce due to illness, to care for someone or pursue further studies
older people who have more disposable income as their ongoing costs decrease.

Assessing your eligibility Even if you don’t belong to any of the target groups, you may still make catch-up concessional contributions this financial year if:

you have unused concessional contribution cap amounts from the 2018-19 financial year
you had a total superannuation balance of less than $500,000 at 30 June 2019, and
if you’re aged between 65 and 74, you must meet the work test for the 2019/20 financial year or be eligible for a work test exemption.

Unused concessional caps (commencing from the 2018- 19 financial year) can be ‘carried forward’ for five financial years on a rolling basis.

How it works

The concessional contribution cap is currently $25,000 (2019/20) and includes salary sacrifice and mandatory employer contributions. In addition, an individual can use unused concessional contribution cap amounts from the 2018/19 financial year if they meet the above requirements.

Example:

If you made total concessional contributions of $10,000 in the 2018-19 financial year and your total superannuation balance at 30 June 2019 was less than $500,000, you’ll be able to make up to $40,000 of concessional contributions to your super this 2019-20 financial year. The $40,000 being the $25,000 annual cap plus the $15,000 unused concessional cap from the 2018-19 financial year.

Other things to keep in mind

Keep in mind that you won’t be able to utilise your unused amounts from the 2018/19 financial year in the current financial year if your total super balance was at least $500,000 at 30 June 2019.

If your total super balance is below $500,000 at the end of this financial year, you may be eligible to make catch up concessional contributions in the following financial year utilising your unused concessional contributions from the 2018/19 and 2019/20 financial years.

Seek advice

If you’re thinking of using the catchup rules, seek professional financial advice on how to use concessional super contributions to your advantage. Your financial adviser may also help you consider the tax implications.

Published on: March 12, 2020

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