Investor InsightsSuper Stategies > Catch up super contribution – a new opportunity to top up your super and save on tax

Catch up super contribution – a new opportunity to top up your super and save on tax

March 2020

This financial year marks a new opportunity to top up your super by carrying forward your unused concessional contribution cap (that’s the amount you are allowed to contribute to your super from your pre-tax income).

Generally,  super members can contribute up to $25,000 of concessional contributions, which include contributions from their pre-tax income and generally any other contributions made by their employer and any personal contributions the member has claimed as a tax deduction. Contributing from pre-tax income effectively lowers their taxable income and boosts their super. In the 2019/20 financial year, you can use any unused concessional contributions from the 2018/19 financial year provided you have total superannuation balances of less than $500,000 at 30 June 2019.

More detail

From 1 July 2018 any unused concessional contributions can be carried forward up to five financial years. From 1 July 2019, if you have a total superannuation balance of less than $500,000 at 30 June of the previous financial year, you may be entitled to contribute more than the general concessional contribution cap using any carried forward unused concessional contributions.

The catch-up super contributions measure could allow you to tax-effectively increase your retirement savings. So, if perhaps you…

  • have an irregular income (maybe you’re self-employed), or
  • are returning to the workforce (maybe you’ve had some time off to have kids), or
  • are approaching retirement (and you’re looking to boost your super while you can), or
  • have received a windfall (maybe you’ve sold an investment with accrued capital gains tax) …

…this could be a good way to give your retirement savings a boost while lowering your taxable income.

Get advice

If it all sounds interesting but maybe a little tough to digest and implement, that’s where a qualified financial adviser comes in. Your adviser can talk you through the investment strategy that’s right for your circumstances.

Case study

Mary is a property developer and she doesn’t receive a regular income. She only makes a profit when she sells a property. She is working on a redevelopment project which won’t be completed until the 2020/21 financial year. She is expecting a healthy net profit upon completion. She hasn’t made any super contributions in the last two financial years. She is seeking to manage her tax liability and tax effectively maximise her super contributions after a discussion with her accountant.

When she sells the property in the 2020/21 financial year, her total super balance at 30 June 2020 is $350,000 allowing her to use unused portion of her concessional contribution caps for the last two years, as opposed to the general cap of only $25,000. This means she can make a personal deductible contribution of up to $75,000 into her super fund to reduce the tax payable on the income generated from the redevelopment project. Assuming this income would otherwise be subject the 39% tax threshold (including Medicare Levy), she may save $18,000 in tax by making the concessional contribution (including her unused amounts).

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Taxation law is complex and this information has been prepared as a guide only and does not represent taxation advice. Please see your tax adviser for independent taxation advice.

Before re-directing your super or moving your money into your product, you will need to consider whether there are any adverse consequences for you, including loss of benefits (e.g. insurance cover), investment options and performance, functionality, increase in investment risks and where your future employer contributions will be paid. Any investment is subject to investment risk, including possible repayment delays and loss of income and principal invested. Returns can go up and down. Past performance is not indicative of future performance.

The information provided is of a general nature and does not take into account your personal needs, financial circumstances or objectives. Before acting on this information, you should consider the appropriateness of the information, having regard to your needs, financial circumstances or objectives. The case studies used in the articles on this website are hypothetical and are not meant to illustrate the circumstances of any particular individual. Opinions expressed in this document are those of the authors only.