Catching up on unused concessional contributions to super is a good way to boost your superannuation if you have had an interrupted income or haven’t been in a position to put as much into super as you’d like. Taking time off work to study, travel or care for your family, or prioritising other financial committments, often means you may not be in a position to make concessional contributions to super. However, if the time arises where you are able to boost your retirement savings, you may be eligible to make catch-up concessional contributions.

A concessional contribution is a contribution that is made to your super fund and includes:

• compulsory super guarantee contributions made by your employer
• voluntary salary sacrifice contributions you ask your employer to make on your behalf before tax and
• voluntary tax-deductible contributions which you can make that you then claim a tax deduction for.

It is worth noting that concessional contributions to super 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.

If you make or receive concessional contributions of less than the annual concessional contributions cap of $27,500 pa (for the 2022/23 financial year), you may be able to accrue these unused amounts and carry forward for use in subsequent financial years. This is known as catch-up concessional contributions. Unused cap amounts can be carried forward for up to five years before they expire. To be eligible to make catch-up concessional contributions, the following criteria apply:

• your total super balance must be below $500,000 on 30 June of the previous financial year
• 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

Client scenario

Katherine is 64 and will retire at 65, her super balance as at 30 June 2021 is $300,000 and over the past two years she has made personal concessional contributions (PCC) of $25,000. We have identified tax savings if Katherine uses the catch-up opportunity and makes an additional PCC of $22,000.

FY	2018/19	2019/20	2020/21	2021/22
Concessional contributions made	$ 8,348	$ 5,478	$32,240	$34,433
Concessional contributions cap	$25,000	$25,000	$25,000	$27,500
Unused concessional contributions	$16,652	$19,522	-$ 7,240	-$ 6,933
Culmulative unused cap	$16,652	$36,174	$28,934	$22,000

 

Income illustration for financial year 2021/2022	Before	After
Assessable income	$76,011	$76,011
Less personal concessional contribution	$25,000	$47,000
Taxable income	$51,011	$29,011
Income tax payable inclusive of Medicare (estimate)	$ 6,599	$    947
Contributions tax (15%)	$ 3,750	$ 7,050
Total tax payable	$10,349	$ 7,997
Tax savings	$2,352.00

 

In addition, if this client also had an investment property to be sold upon retirement, this would trigger a discounted capital gain of $150,000. We can use this rule to reduce the income tax payable.

	Before	After
Discounted Capital Gains	$150,000	$150,000
Less Personal Concessional Contribution	$-	$22,000
Taxable Income	$150,000	$128,000
Income Tax	$ 40,567	$ 32,427
Contribution tax (15%)	$-	$ 3,300
Total tax payable	$40,567	$35,727
Tax Savings	$4,840

 

Need advice about your super contributions?

Contact our financial planning team to ensure you a taking the most benefical actions with regard to your super.

The information on this web page is not advice and is intended to provide general information only. It does not take into account your individual needs, objectives or personal circumstances.