In the past, if you had an irregular or interrupted income, you may have missed out on opportunities to contribute to super. An upcoming change means that, in future, if you don’t use your entire concessional cap, and you’re eligible, you can make ‘catch-up’ concessional contributions.
It used to be a case of ‘use it or lose it’ – if for any reason you couldn’t contribute the maximum annual concessional (before-tax) contribution amount to your superannuation, the opportunity was lost. That meant many people, especially women, had a lower super balance for their retirement because they worked in casual or part-time jobs, or their working life had been interrupted by things like looking after family members or studying.
Now, from July 1, 2018, eligible individuals can start to accumulate unused concessional contributions and carry them forward. From July 1, 2019, you can start paying extra to cover those carried-forward amounts.
An annual cap of $25,000 applies to concessional contributions (applies in 2018/19 and may be indexed in future years).
Concessional contributions include:
If concessional contributions in a year (starting from July 1, 2018) are less than the annual cap, the ‘unused’ amount can be carried forward for the next five financial years. After five years, that unused amount will expire.
This means that if, for example, you only get total concessional contributions of $10,000 out of the available $25,000 in the 2018/2019 financial year, the unused $15,000 can be paid within the next five years. If you’re eligible, you can make greater concessional contributions up to that amount until the end of 2023/2024.
If you’re aged between 65 and 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 (unless eligible for the work test exemption1). You can’t make voluntary concessional contributions once you reach the age of 75.
So, you have an unused amount that you’ve carried forward from an earlier year, and you want to make a ‘top-up’ carry-forward contribution. What now?
You’ll need to look at your ‘total super balance’ (TSB). Your TSB on the previous June 30 must be less than $500,000 for you to be eligible for concessional catch-up contributions.
Your total super balance at a particular time is broadly the total of:
The accumulation phase value of your super savings
The value of your super pension accounts
The 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 service.
The new rules were designed to give people with irregular income or work patterns the same opportunity for a comfortable retirement as those who have a regular income all their working life. You can also take advantage of concessional catch-ups if you don’t contribute the maximum amount one year and are then in a position to invest more for your retirement over the following five years.
From the start of the 2018/19 financial year, keep track of your annual super contributions, particularly if you don’t use the full concessional contribution limit.
From 2019/2020, you can also keep track of any catch-up contributions you make in a given year. This makes it easier to see how much you can catch up in the future.
Meanwhile, you can call us on 132 652 between 8am and 6pm or make an appointment to talk to a financial adviser to ensure you’re well placed to take advantage of this new opportunity.
Cassandra is a 46-year-old earning $100,000 a year.
In 2018/19, she makes total concessional superannuation contributions of $10,000. On June 30, 2019, her total super balance is less than $500,000.
This means that in 2019/20, she has the ability to make concessional contributions of up to $40,000 into her superannuation. Of that, $25,000 is her annual concessional cap and $15,000 is her unused amount from 2018/19, which has been carried forward.
The full $40,000 will be taxed at up to 15 per cent in her superannuation fund.
Adapted from the government’s fact sheet Superannuation Reform: Allowing catch-up concessional contributions
1 An exemption from the work test is available from 1 July 2019. The exemption allows you to make voluntary contributions to your super without the need to satisfy the work test, for one financial year only. This is available to recently retired individuals aged 65 - 74, who have a total super balance less than $300,000 (prior to the most recent 30 June), and met the work test for the previous financial year. Also, this can only be applied once in your lifetime.
The information about super has been prepared without taking into account any particular person’s objectives, financial situation or needs. Before deciding to make a contribution to your super, interested persons should consider the appropriateness of this information having regard to their personal objectives, financial situations or needs.
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