Catch up contributions

23 February 2017

From the 2019/20 financial year, members will be able to make “catch up” concessional contributions.  Where a member is unable to fully exhaust their concessional contribution cap in respect of a financial year, the unused portion (aka shortfall) of the concessional contribution cap can be carried forward to a later financial year and utilised in that later financial year.

The first financial year in which a shortfall is recognised is 2018/19.  Consequently, the first “catch up” concessional contributions can be made in respect of the 2019/20 financial year.  Concessional contribution shortfalls can only be carried forward for five years and must be utilised in the order in which they are incurred.  Further, concessional contributions will only be applied against the shortfall once the concessional contributions cap for the financial year has first been fully utilised.  Finally, catch up contributions can only be made if the total superannuation balance as at the end of the previous financial year is less than $500,000.

Example 3

Dagobert, aged 48, has made concessional contributions in various financial years which are summarised in the following table:

 

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

Contribution

$20,000

$19,000

$21,000

$9,000

$36,000

$24,000

Shortfall

$5,000

$6,000

$4,000

$16,000

($11,000)

$1,000

Progressive total

Nil

$6,000

$10,000

$26,000

$15,000

$16,000

 

(It is assumed that the concessional contribution cap for all financial years is $25,000.)

While there is a $5,000 shortfall in the 2017/18 financial year, this shortfall is disregarded as it predates the commencement of the “catch up” contributions amendments.  Shortfalls of $6,000, $4,000 and $16,000 are counted (as they occur on or after 1 July 2018).  In order to make “catch up” contributions in respect of a particular financial year, it is necessary to first exhaust the concessional cap for that financial year.  Consequently in the 2021/22 financial year, as the concessional contribution cap has been exhausted as $36,000 of concessional contributions have been made, the excess of $11,000 can be treated as “catch up” contributions.  In this case, the excess contributions are applied first to the shortfalls of 2018/19 ($6,000), then 2019/20 ($4,000) and, to the extent of $1,000, against the shortfall of 2020/21($16,000).   

In relation to “catch up” contributions the following points need to be noted:

  • there is no choice as to the order in which excess concessional contributions are applied against the shortfalls – they must be applied to the shortfalls in the order in which they arise;
  • in order to utilise a shortfall, there must be excess concessional contributions – ie the concessional contribution cap for the current year must first be exhausted;
  • a shortfall which is not used within five years, is lost.  In the above example, the shortfall of $6,000 incurred in respect of the 2018/19 financial year must be used by the 2023/24 financial year;
  • in order to make “catch up” concessional contributions for a particular financial year, the total superannuation balance immediately before the start of the financial year must be less than $500,000;
  • however, if the total superannuation balance for a later financial year falls below $500,000, “catch up” contributions can be made in that later financial year against shortfalls incurred in the previous five years;
  • “catch up” contributions can be made by the member or by their employer; and
  • the normal SIS contribution acceptance rules must still be satisfied.
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