Some FAQs on Catch up contributions

Are there any limits on catch up contributions?

First, there is a theoretical maximum catch-up contribution limit. The unused concessional contribution cap arising in respect of a tax year can only be carried forward for at most 5 tax years.

Taking FY 24 as the current tax year, only unused contributions cap from the FY 19, FY 20, FY 21, FY 22 and FY 23 can be applied in respect of FY 24, the current year. Assuming no concessional contributions were made at all in respect of those five tax years, the maximum catch-up contribution in respect of FY 24 is $130,000 (3 years at $25,000 and 2 years at $27,500). So, theoretically, up to $157,500 of concessional contributions could be made in FY 24 - $27,500 ordinary concessional contributions and $130,000 of concessional contributions.

Second, carry forward unused concessional contributions cap must be first applied in the order in which they arose. Consequently, the unused cap from FY 19 must be applied before the unused cap from FY 20 and so on.

Third, a carried cap can only be applied in respect of a tax year if the cap applying for that tax year is first fully exhausted. So to access the catch up contribution limit in FY 24, at least $27,500 of concessional contributions must be made.

Fourth, as catch-up contributions legislation applied from 1 July 2018, the first tax year in which an unused cap could be carried forward is FY 19. If the unused cap from FY 19 is not used in FY 24, it will be beyond the 5 five carry forward rule and cannot be used in any subsequent financial year.

Fifth, in addition to the theoretical maximum catch up, there is additionally a practical limit. To the extent that catch-up contributions are your personal contributions, you must have sufficient assessable income (whether from employment, business or investment or trust distributions) against which the deduction for the personal contribution can be claimed.

Lastly, in general catch-up contributions must be made before age 75.

Can you make catch up contributions a second or more time?

In short yes. So long as the basic conditions are satisfied (total super balance immediately before the relevant tax year is under $500,000 and the concessional contributions cap for the current year is first fully exhausted) and either the catch-up contributions are employer contributions or personal contributions and you have sufficient assessable income for the current year against which to claim the tax deduction.

Can you make catch-up contributions when in pension phase?

In short yes – so long as the basic conditions are satisfied. However as you are in pension phase, you need to have sufficient assessable income against which to claim a tax deduction for your personal contributions. This may not happen given most of your income arising from pensions will be tax free.

Can you make catch-up contributions if your total superannuation balance has moved below $500,000?

Again in short, yes. Your total superannuation balance may move below $500,000 due to negative investment returns or due to regular benefit payments (whether pension or lump sum) or even (in the case of non-SMSF super balances) due to fees and expenses charged by the fund.
So can you withdraw an amount from super with the intention of driving the total superannuation balance to be below $500,000 to permit the making of catch-up contributions?

Assuming the conditions are satisfied to make catch-up contributions and the relevant contributions are made, will the general anti-avoidance provision apply?

This is a difficult question and there must be a risk of such provisions applying. If the withdrawal is driven by the desire to improve the superannuation balance of a spouse (by gifting the withdrawn amount to your spouse who then applies the amount as contribution to their superannuation balance) and the consequence of such action is that your super balance falls below $500,000 – then possibly not.

Can you recycle a super balance to make catch-up contributions?

Again in short, yes. However, two points need to be made. First, you could be moving a tax free or largely tax free component to being taxable components. Second, the issue of the application of the general anti avoidance provision will loom large.

Can you make catch-up contributions in the same tax year as you make bring forward contributions, downsizer contributions or event CGT contributions?

Yes, as the relevant issue is your total superannuation balance immediately before the start of the tax year – not the total superannuation balance as it changes throughout the tax year as contributions are progressively made.

However, timing is everything. If you were to make downsizer contributions, bring-forward contributions or CGT contributions in the prior tax year, it is highly likely that your total superannuation balance will be or exceed $500,000 thereby disqualifying you from making catch-up contributions.

How do I know my catch up contribution amount?

The ATO keeps a record of your concessional contributions for each tax year. Consequently, the ATO can determine the amount of your unused cap space. This information is available via the MyGov website.