In November 2016, the government enacted measures (effective 1 July 2018), to enable individuals who may not have maximised their concessional contributions cap in prior years, the opportunity to make ‘catch-up’ contributions. The measures are targeted at those individuals who have experienced interrupted work patterns or irregular income and provide these individuals an ability to save more for their retirement.
Explanation of ‘carry forward concessional’ measures
From 1 July 2018 if you have a Total Super Balance (TSB) of less than $500,000 on 30 June of the previous financial year, you may be entitled to contribute more than the general concessional contribution cap to the extent of any unused cap amounts. The general concessional contribution cap for the 2018-19 and 2019-20 financial years is $25,000p.a.
Concessional Contributions are contributions that are made into your super fund before tax, and include:
- employer contributions, such as:
- compulsory employer contributions;
- any additional concessional contributions your employer makes;
- salary sacrifice payments made to your super fund; as well as
- personal contributions which you are allowed as an income tax deduction
The first year you will be entitled to carry forward unused cap space is the 2019–20 financial year. Unused cap amounts are available for a maximum of five years, and after this period will expire. If your TSB is above $500,000, any unused cap amounts can still be accumulated for up to five years and used in a later year when your TSB falls below $500,000.
For example, if for the 2018-19 financial year, you make only $5,000 in concessional contributions, you will have $20,000 in carry forward concessional contributions that you may be eligible to contribute above the annual cap of $25,000 in a later year. If your TSB at 30 June 2019 is above $500,000, in the 2019-20 year, you will not be eligible to contribute above your annual cap of $25,000. However, if your Total Super Balance falls below $500,000 in a later financial year, you can then utilise those carry forward contributions and contribute above the annual cap up to the excess amount carried forward. At the end of the five year period, any unused carry forward contributions will expire.
If you would like further information around these measures and your eligibility to contribute above the general concessional contribution cap, please contact your Davidsons team member on (03) 5221 6399.
Disclaimer: this information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article.