Catch-up super contributions relate to the concessional contribution cap.
A concessional contribution is defined as a contribution where the contributor claimed a tax deduction for making the contribution.
The amount of concessional contributions that can be made each year is limited by the concessional contribution cap.
The current concessional contribution cap is $25,000 per person, per financial year.
However, the catch-up carry-forward super contribution provisions may allow for additional contributions to be made.
Catch-Up Super Contributions
The catch-up carry forward rules allow you to carry forward unused concessional contribution caps.
However, there are some conditions and eligibility criteria that needs to be met.
The concessional contribution catch-up rules were introduced from 1 July 2018.
It allows you to carry forward any portion of the unused cap for up to five years, provided your super balance is below $500,000.
The five-year period is on a rolling basis.
You can only utilise your carry-forward unused concessional contribution cap if your super balance is less than $500,000 at the end of 30 June in the previous financial year.
You can begin accumulating unused concessional contributions from the beginning of the 2018/19 financial year.
This means that the first year you can utilise your unused concessional cap is from 1 July 2019.
Unused concessional contributions under the carry forward catch-up rules continue to accumulate even if your balance exceeds $500,000.
Therefore, should your balance temporarily exceed $500,000 and then drop back below, you will not lose the carried-forward amounts.
Keep in mind though, they will only be carried forward for a rolling five-year period and you can only make catch-up contributions if your balance was below $500,000 at the end of the previous financial year.
The five-year rolling period includes the financial year the first year that the full concessional cap was not used.
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Catch Up Concessional Contributions Example
As mentioned, the standard concessional contribution cap is $25,000.
This is the concessional contribution cap for people of all ages, provided they are eligible to make or receive super contributions.
Let’s assume your superannuation account received concessional contributions of $20,000 in the 2018/19 financial year.
This would mean you have unused carry forward concessional contributions of $5,000.
For the 2019/20 financial year, your concessional contribution cap would be $25,000, plus the $5,000 unused contributions from 2018/19.
This would allow you to make $30,000 worth of concessional contributions in the 2019/20 financial year, made up $25,000 plus a catch-up contribution of $5,000.
The unused $5,000 carry forward amount would expire on 30 June 2023.
If you are aged between 65 and 74, you may need to meet the superannuation work test in order to make additional concessional contributions to super.
Examples of Concessional Contributions
There are a range of types of concessional contributions that can be made or received into a superannuation account.
You need to ensure your total combined concessional contributions do not exceed the contribution cap and any carry-forward amount.
Detailed below are some examples of concessional contributions.
Employer Superannuation Guarantee (SG) contributions: These are mandated contributions that your employer must make into your super account.
The amount contributed by your employer is calculated as a percentage of your salary.
Salary Sacrifice contributions: You may have arranged with your employer to salary sacrifice part of your salary into superannuation.
Salary sacrifice contributions are contributed to your super account rather than being received as income into your personal bank account.
You can decide how much you wish you salary sacrifice.
Personal Concessional contributions: You can make contributions into your super account from your personal bank account and then claim a personal tax deduction for the value of the contribution.
This is a type of contribution was previously only available to self-employed people, but can now be made by anyone.
Employer SGC, salary sacrifice contributions and personal concessional contributions all count towards the same $25,000 concessional contribution cap.
Therefore, you need to add-up all of these to make sure you do not exceed the cap.
It is best to begin with calculating how much you expect to receive in SGC contributions, then work out how much more can be contributed up to the concessional contribution cap.
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Some people even have super-structured insurance policies. This is not referring to insurance owned within super, but rather a policy owned under a super structure.
In this instance, the policy is owned by a superannuation trust, but there is no super balance.
Contributions made to a super-structured policy are equal to the premium amounts.
You may think that you are simply paying an insurance premium when, in actual fact, you are making a concessional contribution, which is immediately being used to fund an insurance premium within super.
These types of premium payments are actually classified as concessional contributions and will also count towards the cap.
What is the Bring-Forward Super Contribution Rule?
This allows you to bring-forward up to two additional years of the non-concessional contribution cap.
The current non-concessional contribution cap is $100,000 per person, per financial year.
To use the bring-forward rule provisions, you need to be under age 65.