Table of Contents

The catch-up concessional contributions rule allows Australians who have unused concessional contributions (pre-tax contributions) from previous years to contribute more to their superannuation than the standard annual concessional cap. For those over 60, this rule can be especially beneficial in boosting super balances closer to retirement, allowing them to make up for years when they may not have been able to contribute as much.

In this blog, we’ll break down how catch-up concessional contributions work, who’s eligible, the benefits for those over 60, and important considerations when using this strategy.

What Are Concessional Contributions?

Concessional contributions are contributions made to your superannuation fund before tax. These include:

Employer Contributions: Compulsory employer contributions (Superannuation Guarantee) and any additional employer contributions.
Salary Sacrifice Contributions: Contributions you make by agreeing to “sacrifice” a portion of your pre-tax salary.
Personal Contributions for Which You Claim a Tax Deduction: Self-employed individuals or those without employer-sponsored super can claim a tax deduction on their personal contributions.

The annual concessional contribution cap is currently AUD 30,000. Contributions within this cap are taxed at a concessional rate of 15%, which is generally lower than most people’s marginal income tax rates.

How the Catch-Up Concessional Contributions Rule Works

The catch-up concessional contributions rule allows you to carry forward unused concessional contribution caps from the past five years, starting from July 1, 2018. This rule enables eligible individuals to make larger contributions in a particular year, using their unused cap amounts from prior years.

Example: If you contributed AUD 15,000 in concessional contributions in 2020-21, you’d have AUD 12,500 in unused concessional cap space that you could carry forward and use within the next five years.

Eligibility for Catch-Up Concessional Contributions

To use the catch-up concessional contributions rule, you must meet the following criteria:

Total Superannuation Balance (TSB) Under AUD 500,000: You are eligible if your total superannuation balance was less than AUD 500,000 as of June 30 in the previous financial year.
Carry-Forward Unused Contributions: The rule only applies to unused concessional contributions accrued since July 1, 2018.
Age Limit: Although there is no age restriction on making concessional contributions, those over 67 may need to meet the work test or work test exemption to contribute to super if they are not retired.

Benefits of Catch-Up Contributions for Those Over 60

For Australians over 60, the catch-up concessional contributions rule offers several advantages, especially as they approach retirement:

Boost Superannuation Balances: This rule provides an opportunity to build superannuation quickly by catching up on missed contributions from previous years.
Tax Efficiency: Concessional contributions are taxed at only 15%, which is often lower than the marginal tax rate for many individuals. By using catch-up contributions, you can reduce your taxable income and potentially lower your overall tax liability.
Additional Flexibility: The rule provides greater flexibility to make larger contributions in specific years, such as when selling an asset or receiving a lump sum, without exceeding annual contribution limits.
Aligns with Retirement Planning: For those approaching retirement, using catch-up contributions can maximise their retirement savings just before they begin drawing down their super.

Calculating Unused Concessional Contributions

To determine your unused concessional contributions, you need to review your contribution history since July 1, 2018. Any amount below the concessional cap in a given year can be carried forward for up to five years.

Example Calculation:

2018-19: Contributed AUD 10,000 (unused cap: AUD 15,000)
2019-20: Contributed AUD 15,000 (unused cap: AUD 10,000)
2020-21: Contributed AUD 27,500 (unused cap: AUD 0)
2021-22: Contributed AUD 20,000 (unused cap: AUD 7,500)

As of 2022-23, you could carry forward AUD 32,500 in unused concessional contributions (AUD 15,000 + AUD 10,000 + AUD 7,500) to potentially make a larger contribution in a single year.

Work Test for Those Over 67

If you are over 67, you may need to meet the work test to be eligible to make contributions to super. To satisfy the work test, you must be gainfully employed for at least 40 hours over a consecutive 30-day period during the financial year.

However, if you recently retired, you may qualify for the work test exemption. This exemption allows you to make voluntary contributions for up to 12 months after you cease work, provided your total super balance is below AUD 300,000.

Maximising Tax Benefits with Catch-Up Contributions

The catch-up contributions rule can provide significant tax advantages for those with high incomes or lump sum payments, as they can make larger contributions in one year and reduce their taxable income.

Example: Suppose you sell an investment property in 2022-23 and make a large capital gain. You could use your unused concessional contribution cap to make a catch-up contribution to super, reducing your taxable income and potentially lowering your tax on the capital gain.

Using Catch-Up Contributions Alongside Other Superannuation Strategies

Catch-up contributions can be used in conjunction with other superannuation strategies, such as:

Salary Sacrifice: Combining salary sacrifice and catch-up contributions can maximise concessional contributions in high-income years.
Downsizer Contributions: Those over 60 who sell their primary residence may be eligible to make downsizer contributions, up to AUD 300,000 per person, which can complement the catch-up strategy.

Important Considerations and Risks

While the catch-up concessional contributions rule offers substantial benefits, there are some important considerations and potential risks:

Contribution Caps: Catch-up contributions are subject to the concessional cap, and exceeding the cap will lead to additional tax.
Total Superannuation Balance: The rule applies only to those with a TSB of less than AUD 500,000 as of the previous June 30. If your balance exceeds this, you may lose access to unused cap amounts.
Investment Risk: Additional contributions can boost retirement savings, but investment risk remains, so it’s essential to ensure your investment strategy aligns with your retirement goals.

Seek Professional Advice for Personalised Planning

The catch-up concessional contributions rule is a powerful tool, but it can also be complex to navigate, especially when managing contribution caps, tax implications, and retirement timelines. Consulting a financial adviser or tax professional can help ensure that you maximise your contributions without exceeding limits and help align your super strategy with your overall financial and retirement goals.

How a Financial Adviser Can Help:

Contribution Planning: A professional can calculate your carry-forward amounts and develop a strategy to make the most of unused concessional caps.
Tax Strategy: Advisers can help minimise your taxable income through strategic use of superannuation contributions, especially if you’re receiving lump sums or have high taxable income.
Retirement Planning: An adviser can integrate catch-up contributions with other superannuation strategies to create a tax-efficient and sustainable retirement income plan.

Conclusion

The catch-up concessional contributions rule provides an excellent opportunity for Australians over 60 to boost their superannuation balances and maximise tax savings. By carrying forward unused concessional caps, you can make additional contributions to super and catch up on contributions that were missed in previous years. For those approaching retirement, this rule allows for a last-minute boost to super balances, improving retirement readiness and providing greater financial security in retirement. Before making any large contributions, consider speaking with a financial adviser to ensure your strategy is both compliant and optimised for your unique financial goals.