Author: Jason Roccasalvo, Partner, TAG Financial Services
We recently had the pleasure of being asked for comment in the Australian Financial Review on the topic of catch-up contributions.
Financial Review Articles links:
How can my wife make the most of super tax perks?
Can my wife bring forward annual super contribution caps?
This is a topical issue and as advisers, we need to stay on the lookout for opportunities to help our clients maximise their wealth. Year 5 of the “catch up” regime is almost upon us. For our clients with lower (less than $500,000) total super balances, the catch-up regime is a powerful tool to help mitigate taxes in their personal names.
Catch up contributions effectively allow members to contribute greater amounts than the general concessional contributions cap (currently $27,500p.a.) – provided the main conditions are met, by applying previously unused concessional contributions cap amounts since 1 July 2018, without exceeding the concessional contribution cap.
Consider this Example:
In the 2018-19 financial year, Layla’s employer made superannuation guarantee contributions of $10,000 on her behalf to her superannuation fund.
Layla did not make any deductible personal superannuation contributions to her fund. The concessional contributions cap for the 2018-19 financial year was $25,000. Layla’s unused concessional contributions cap amount for the 2018-19 financial year is, therefore, $15,000 which can be carried forward and utilised over the next 5 years.
As a result, for the 2019-20 financial year, Layla could contribute up to $40,000 of concessional contributions, assuming her TSB on 30 June 2019 was less than $500,000.
During the 2019-20 financial year, Layla’s employer again made superannuation guarantee contributions of $12,000 on her behalf into her superannuation fund. Layla also decided to make a deductible personal contribution into her fund of $10,000 to boost her retirement benefits. Her TSB on 30 June 2020 is still less than $500,000.
| 2018-19 | 2019-20 | 2020-21 | 2021-22 | |
| General contribution cap | $25,000 | $25,000 | $25,000 | $27,500 |
| Concessional contribution made (ie her SGC) | $10,000 | $12,000 | $12,000 | $13,000 |
| Unused concessional contributions made | Nil | $10,000 | Nil | |
| Annual carry forward unused amount | $15,000 | $13,000 | $13,000 | |
| Total carry forward cap accrued | $15,000 | $18,000 | $31,000 |
Layla’s TSB is less than $500,000 as at 30 June 2021. During the current financial year (2021-22), Layla could make a concessional contribution into the fund of up to $45,500 (i.e., $31,000 carried forward from prior years, plus $14,500 remaining in the current year) without breaching the concessional cap.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2022. Please do not reproduce without the expressed written consent of the author.