Catch Up Super Contributions

[Andrew from Vista Financial]

Did you know that people can now carry forward unused concessional contributions to Super (these contributions are contributions such as employer contributions, salary sacrifice and tax deductible contributions).

This could present some very good retirement (wealth) and tax planning opportunities going forward.

Here is some more information on it:

Carry-forward concessional contributions

One of an extensive range of superannuation reforms the Federal Government announced in its 2016 Budget relates to the opportunity for eligible people to carry forward the unused portion of their concessional contribution cap. Now legislated, this initiative commenced from 1 July 2018.

What is a concessional contribution?

 

Concessional contributions comprise of:

·         Contributions made by an employer on behalf of their employees to fulfil their Superannuation Guarantee obligations,

·         Contributions made under an effective salary sacrifice agreement between an employee and their employer,

·         Other discretionary contributions made by an employer.

·         Personal contributions made by an individual where a personal tax deduction is to be claimed, and

·         Contributions made by third parties, such as contributions made by a parent for their adult children.

·         Concessional contributions can be made for or on behalf of a person under age 65 regardless of whether they work or not.

Concessional contribution cap

 

From 1 July 2017, the maximum concessional contributions that could be made to superannuation in any one financial year was limited to a maximum of $25,000. This is referred to as the concessional contribution cap.

Th cap will increase in the future in line with movements in Average Weekly Ordinary Time Earnings, in increments of $2,500. This means, it may be some year before the concessional contribution cap is increased to $27,500.

Total Superannuation Balance

 

To be eligible to carry forward the unused portion of the concessional contribution cap, a person must have a total superannuation balance of less than $500,000. The total superannuation balance is the total of all the money a person has in the superannuation system as at the previous 30 June.

When calculating the total superannuation balance all amounts held in superannuation accumulation accounts, the balance of any accounts paying a pension, and amounts being transferred between superannuation, are included.

For example, a person with $200,000 is a superannuation accumulation account and a pension account balance of $250,000, as at the previous 30 June, will have a total superannuation balance of $450,000.

How the carry-forward opportunity works

 

Any unused concessional contribution cap that accrues from 1 July 2018 may be carried forward for a period of up to five years.

If the concessional contribution cap was not fully utilised in any financial year before 1 July 2018, the unused portion cannot be carried forward.

Example

Elaine has a total superannuation balance of less than $500,000 as at 30 June 2018. Her employer makes concessional contributions of $8,000 in the 2018-19 financial year. She also makes a personal tax deductible contribution of $2,000, bringing her concessional contributions for the year to $10,000. Elaine’s unused concessional contribution cap is $15,000 (i.e. $25,000, less $10,000). She can carry the unused portion of her concessional contribution cap forward for up to 5 years. This means that in 2019-20, the maximum amount of concessional contributions that could be made, provided her total superannuation balance as at 30 June 2019 was less than $500,000 is $40,000 (the standard $25,000 concessional contribution cap, plus $15,000 carried forward from 2018-19).

The following table illustrates the application of the carry-forward opportunity:

	2018-19	2019-20	2020-21	2021-22	2022-23	2023-24	2024-25
CC Cap*	$25,000	$25,000	$25,000	$25,000	$25,000	$25,000	$25,000
CCs Made	$10,000	$10,000	$0	$35,000	$25,000	$25,000	$28,000
Unused cap	$15,000	$15,000	$25,000	$0	$0	$0	$0
C/F applied	N/A	$0	$0	$10,000	$0	$0	$3,000
Unused C/F	$15,000	$30,000	$55,000	$45,000	$45,000	$45,000	$37,000**

*   Indexation of the concessional contribution cap has been ignored

** Remaining unused cap from 2018-19 of $5,000 has dropped off – 5 years have elapsed.  

 

Edited August 29, 2019 by Andrew from Vista Financial
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[rbrooks]

I rang the ATO Super phone number on 13 10 20.

They say that for immigrants (and for young people just joining the workforce) who haven't paid into a Super in some of those previous years, that we cannot use those years' "carry forward unused contribution cap amounts".

The lady was quite insistent that she got that correct and is a Super specialist at the ATO. She referred me to ATO's official web site on this:

https://www.ato.gov.au/individuals/super/growing-and-keeping-track-of-your-super/caps-limits-and-tax-on-super-contributions/concessional-contributions-cap/#Carryforwardunusedcontributions

But the web site says nothing about how this works for people joining the work force new.  In fact when I searched the internet I couldn't find anything on it.

So I've paid extra into my Super beyond this year's cap and now I will have a tax bill I wasn't expecting...

 

Does anyone on this forum know if that lady has it correct?

[Andrew from Vista Financial]

Hi

Yes it would have been helpful if this Lady had provided a link to something specific in trying to evidence her point.

As it stands and I have checked this with our technical department, our reading of the legislation is that the only requirements that need to be met in order to carry forward any unused concessional contribution cap are:

1.  there is an unused concessional contribution cap that has accrued since 1 July 2018;
2. the individual had a total superannuation balance on the previous 30 June of less than $500,000 (this may be $0); and
3. a concessional contribution cap is made in excess of the current ($27,500) concessional contribution cap. 

I am attending a professional development day at the end of November and this topic is actually going to be a part of a superanuation strategy presentation and I am told, that their view is that, a newly arrived person, or someone returning to Australia after a period of absence, should have access to the ability to carry forward their unused concessional contribution cap provided the three conditions mentioned above have been met.

 

Edited October 30, 2023 by Andrew from Vista Financial

[rbrooks]

12 hours ago, Andrew from Vista Financial said:

Hi

Yes it would have been helpful if this Lady had provided a link to something specific in trying to evidence her point.

As it stands and I have checked this with our technical department, our reading of the legislation is that the only requirements that need to be met in order to carry forward any unused concessional contribution cap are:

1.  there is an unused concessional contribution cap that has accrued since 1 July 2018;
2. the individual had a total superannuation balance on the previous 30 June of less than $500,000 (this may be $0); and
3. a concessional contribution cap is made in excess of the current ($27,500) concessional contribution cap. 

I am attending a professional development day at the end of November and this topic is actually going to be a part of a superanuation strategy presentation and I am told, that their view is that, a newly arrived person, or someone returning to Australia after a period of absence, should have access to the ability to carry forward their unused concessional contribution cap provided the three conditions mentioned above have been met.

 

In talking with her, she didn't provide anything else specific because all the ATO has is that one web page.

I was re-reading this with a friend and we think the devil is in the wording "unused concessional contribution cap that has accrued". If you are not in the country then nothing has accrued. It can't accrued because you were not in scope in those prior years as you were in the UK.

If you squint your eyes and look at it sideways-funny, you can kind of see how that logic might be buried in there...