- 1. What is the concessional cap for the 2018/2019 financial year?
- 2. What super contributions are counted towards the concessional cap?
- 3. If I don’t use my full concessional cap in a year, can I add the unused amount to the following year’s cap?
- 4. What is the catch-up concessional contributions rule?
- 5. I heard that the catch-up contributions rules are linked to how much super you have. Is that true?
- 6. How will the Total Superannuation Balance be measured?
- 7. How do I track whether I have a TSB of less than $500,000?
- 8. How do I track my unused portions of the concessional cap?
- 9. What happens if my Total Super Balance exceeds $500,000, but then falls below $500,000 at a later date?
- 10. Can I use the catch-up concessional contributions rules if I’m taking a super pension?
- For more information…
In this article, you can find the answers to 10 important questions about the new catch-up concessional contributions rule. For information on the reduced concessional contributions cap since July 2017, see SuperGuide article Concessional contributions caps slashed since July 2017.
For a comprehensive guide on concessional contributions, see SuperGuide article Super concessional (before-tax) contributions: 2017/2018 survival guide.
For a comprehensive guide on non-concessional (after-tax) contributions, see SuperGuide article Your 2017/2018 guide to non-concessional (after-tax) contributions.
Ten Q&As about the catch-up concessional contributions rules
- What is the concessional contributions cap for the 2018/2019 year?
- What super contributions are counted towards the concessional cap?
- If I don’t use my full concessional cap in a year, can I add the unused amount to the following year’s cap?
- What is the catch-up concessional contributions rule?
- Is the opportunity to make catch-up contributions, linked to how much super you have?
- How will the Total Superannuation Balance (TSB) be measured?
- How do I track whether I have a TSB of less than $500,000 in super?
- How do I track my unused portions of the annual concessional cap?
- What happens if my total super balance (TSB) exceeds $500,000 but then falls below that figure?
- Can I use the catch-up provisions if I’m taking a super pension?
The annual concessional (before-tax) contributions cap is $25,000 and is a single cap for all age groups. Although the annual cap is indexed in $2,500 increments, the cap was not increased for the 2018/2019 year. The 2017/2018 year concessional cap is also $25,000.
A concessional contribution is a before-tax super contribution, and can be an employer’s Superannuation Guarantee contribution, a salary sacrificed super contribution, and, any other employer-sourced contributions (if applicable). A concessional contribution can also take the form of a tax-deductible super contribution.
Reminder: Superannuation Guarantee contributions count towards a person’s annual concessional cap.
3. If I don’t use my full concessional cap in a year, can I add the unused amount to the following year’s cap?
In the past, such a strategy was not possible. If you didn’t use the full cap in a financial year, that unutilised amount was not available for the next financial year, or future financial years.
From 1 July 2018 however, Australians will be able to make catch-up concessional contributions if they have not fully utilised the concessional cap from the previous year, or previous years (up to 5 years, from 1 July 2018).
From 1 July 2018, if your Total Superannuation Balance (includes all balances, if you have more than one super account) is less than $500,000 at the end of a financial year, then you will have the opportunity to utilise the unused portions of your concessional caps from previous years (up to 5 years’ worth) in the following financial year, or future years.
The unused cap amounts can start to be carried forward from 1 July 2018, that is, from the start of the 2018/2019 financial year, which means the 2019/2020 year is the first financial year that individuals can take advantage of unused cap amounts from previous financial years.
Yes, the opportunity to make catch-up concessional contributions is linked to the size of your superannuation account balance/s.
The $500,000 Total Superannuation Balance threshold is the same crazy idea that the former ALP government proposed when offering a $50,000 concessional cap for those aged 50 years or over with less than $500,000 in super, until they retracted this proposal and instead introduced a concessional cap of $35,000 (unindexed) for over-60s, taking effect from July 2013, which was then expanded to over-50s from July 2014.
From 1 July 2018, the government now allows Australians with a TSB of less than $500,000 in super to make catch-up concessional contributions taking advantage of unused portions of caps from previous years (up to 5 previous years, starting from 1 July 2018.
The measurement of the ‘Total Superannuation Balance’ for each fund member is convoluted. The $500,000 Total Superannuation Balance thresholds creates a lot of complication for fund members hoping to save extra for retirement.
According to the explanatory memorandum accompanying the new legislation, an individual’s Total Superannuation Balance at a particular time includes the following three items:
- The value of all superannuation interests in accumulation phase (that is, all super interests not in retirement phase)
- The balance of a person’s transfer balance account (generally commencement value of a superannuation pension), adjusted to reflect the current value of account-based pension interests in retirement phase (formerly called pension phase)
- ‘In transit’ rolled over superannuation benefits (that are not yet reflected in the balances mentioned in the previous two bullets).
The sum of these amounts is then reduced by the sum of any structured settlement contributions (if applicable), which relate to compensation payments resulting from serious injury and income loss that are rolled over into super.
Note: You are responsible for knowing what your total superannuation balance is each year, For more information about how your Total Superannuation Balance is calculated (see SuperGuide article Total Superannuation Balance: 7 reasons why your TSB matters). The ATO now requests more comprehensive data for large super fund members and more regular reporting requirements for SMSFs. especially SMSF members.
We suspect the $500,000 Total Superannuation Balance (TSB) threshold for using the catch-up concessional contributions opportunity will be an extremely unpopular mechanism, once Australians realise how clunky the reporting systems are in ensuring this important information is available to fund members.
According to the government’s fact sheet on catch-up concessional contributions, if you want to know whether you have a TSB of more than $500,000 at the end of the previous financial year, then “in the first instance, you should contact your fund(s) to determine the value of your total balance”.
If you have more than one super account and/or more than one pension account, then you need to contact all of your super funds. Apparently, there is no central reporting register that allows to access this information in a timely manner. Although you can use the ATO’s MyGov online service to find out the last reported balances for all of your superannuation accounts (see SuperGuide article Coping with myGov: Why the government wants you to go online). Note that this MyGov information may be at least 12 months old because super funds are not required to report this information until 31 October following the end of the financial year, and then you have to give the ATO time to update its own systems with this information.
As mentioned earlier, the ATO now requests more comprehensive data for large super fund members and more regular reporting requirements for SMSFs. especially SMSF members, but we anticipate an administrative horror show for super fund members taking advantage of this opportunity in the first year of operation. Note that the first year that you can act on unused portions of concessional caps is the 2019/2020 year (from 1 July 2019), although unused portions of the concessional cap start accruing from 1 July 2018.
According to the government’s fact sheet on catch-up concessional contributions, you are responsible for keeping track of your unused portions of your concessional cap each year. You may ask, “How am I supposed to do that?” Well, the government says “you should keep track of [your] available amounts by reviewing prior year concessional contributions compared to the relative cap in that year. This information can generally be found on the member contribution statements [super] funds provide to members each year”.
Note that member statements are not normally available until the September following the end of the financial year (30 June), although super funds may have more current information available earlier via online access. As I understand, super funds are not required to report super contributions allocated to each fund member for the financial year, until 31 October following the financial year-end. You can be nearly 6 months into the financial year before you can start planning what contributions you make for the year.
Unless I have missed some key information, the implementation of the catch-up concessional contributions provisions will place an unnecessary fact-finding burden on fund members, and place them under considerable stress to follow up with one or more super providers.
Noting also that the federal government is implementing more frequent reporting requirements for both large super funds and SMSFs, to enable better monitoring of the Total Superannuation Balance, and of concessional caps, and unused portions of concessional caps.
Presumably, over time, accessing this information will become more streamlined, but those Australians who are close to the $500,000 TSB threshold will potentially have to wait several months into the new financial year before they can start planning any concessional contributions strategy.
Note: Keeping in mind that your employer’s compulsory Superannuation Guarantee contributions also count towards your annual concessional cap, which means you will need to check with your super fund when quarterly (or monthly) SG payments are made to your super account, to help you work out how much of your concessional cap you can consider ‘unused’. Depending on the take-up of the catch-up concessional contributions measure, millions of fund members may end up inundating the various super fund call centres to seek this information, and that assumes a fund member only makes super contributions to the one super fund.
9. What happens if my Total Super Balance exceeds $500,000, but then falls below $500,000 at a later date?
The explanatory memorandum appears to be silent on this issue. According to previous government documents however, if your Total Superannuation Balance exceeds $500,000 but a later date it falls back below $500,000, then you will again be eligible to take advantage of the catch-up concessional contributions provisions. I am not yet certain how this exception will be implemented or what the rules will accept as a permissible drop back to less than $500,000. We will update this paragraph when we have more information.
Warning: From my reading, it does NOT seem that the $500,000 TSB threshold is to be indexed over time, which, if correct, is outrageous. Since the rule does not take full effect until July 2019 (although unused portions accrue from July 2018), we have some time to plan for the catch-up concessional contributions provisions, although we doubt anyone will be prepared for the administrative nightmare that will be created.
A universal annual concessional cap of $25,000 applies to Australians of all ages for the 2017/2018 year, and for the 2018/2019 year. The $25,000 cap will be indexed periodically in line with AWOTE, and only in $2,500 increments.
Accordingly, the catch-up concessional contributions rules are also available to Australians of all ages, whether retired or not. A person aged 65 years or over must work at least 40 hours in a 30-day period, during the financial year in which the person wishes to make a super contribution. For more information on the contribution rules for over-65s, see SuperGuide article Over-65s work test: How does it operate?
For more information…
For more information on the catch-up concessional contributions rules, and concessional contributions generally, see the following SuperGuide articles:
- Super opportunity: Catch-up concessional contributions from July 2018
- Super contributions: What’s going on with the catch-up concessional contributions rules?
- Super concessional (before-tax) contributions: 2017/2018 survival guide
- Concessional contributions caps slashed since July 2017
- Super opportunity: Catch-up concessional contributions from July 2018
- Salary sacrifice and super: A guide for employees and employers
- Employees can now make tax-deductible super contributions (since July 2017)
- Concessional contributions cap: A quick guide (10 Q&As)