Super explained: catch-up contributions

We’ve all heard that super is a tax-advantaged structure for retirement savings, and more people are realising that “catch-up contributions” are available – but what exactly does that mean?

But first – why contribute more to super?

Superannuation does impose restrictions on access to your money. It is, after all, intended to provide for your retirement. So why would you lock up more of your money? Because superannuation remains one of the most tax-favoured environments within which to build wealth. Investment income is taxed at a low 15% (compared to marginal tax rates) and even better, retirement pension income is taxed at 0%. That can make it an ideal place to invest your long-term savings.

What are concessional contributions?

Concessional contributions are super contributions that have been claimed as a tax deduction by someone. They include employer contributions – both super guarantee and salary sacrifice – as well as personal contributions on which you may be eligible to claim a tax deduction. These contributions are taxed at 15% (up to 30% for high earners) which is generally much less than our normal income tax rates. From the 2021/22 financial year, the limit on concessional contributions from all sources is $27,500. In the past these limits were a “use it or lose it” proposition.

This is where “catch-up” or carry-forward contributions come in

From the start date of 1 July 2018, individuals who do not use all of their concessional contribution cap in a year can carry-forward the unused cap amount for up to five years, to effectively increase their cap in later years. The rule was introduced to bring some fairness to the super system for those experiencing career interruptions. Eligibility requires a Total Superannuation Balance of less than $500,000 at 30 June of the previous financial year, and an unused cap amount from one or more of the financial years from 1 July 2018.

The unused CCs cap information is available via member’s myGov account under-> Services-> ATO-> Super->Information-> Carry Forward Concessional Contributions.

Why would I do that when super has been going backwards?

While there is a lot of uncertainty about the Australian and Global economy right now, it’s clear that sharemarkets are much lower than they were 6 months ago. Will they go lower? When will they rebound? Nobody knows – but history tells us that markets do recover, and often quite rapidly – so it often makes sense to keep investing and accumulating long term assets through these down times. Doing so in a tax effective manner through salary sacrifice or personal deductible contributions can be a powerful strategy.

Need help?

If you’re looking to review your super strategy or investments, speak to you AGS financial planner or contact us here.


Published : 11 Jul 2022