You know by now that your salary sacrifice and any personal contributions where a tax deduction is claimed must fall under $25,000, but did you know about catch-up contributions? Danielle Stevens explains.

Every year when the Federal Budget is announced, we wonder what the Honourable Swans, Hockeys and Morrisons of Australia will do to burden or enhance our financial position as an Australian tax payer.

Seeing as my preservation age is getting further and further away from me, I find myself astounded by the regular amendments to the laws and regulations surrounding superannuation funds.

In May 2016 the Honourable Scott Morrison proposed the infamous $1.6m pension cap, the reforms to TRIS accounts and the reduction of concessional contributions. These rules all came into effect from 1 July 2017.

Scott Morrison on catch-up contributions

Your accountant or financial advisor has made you aware of these changes I’m sure.

Hopefully by now, you’re not sweating more than Barnaby Joyce meeting Vikki Campion’s father.

catch-up contributions

So, you know what Morrison did to your beloved concessional contributions, but let’s talk about what you can do to soften the blow.

From July 1, 2017 concessional (before-tax) contribution was reduced to $25,000. This was across the board for all ages.

That means your Super Guarantee (employer mandated 9.5%), salary sacrifice and any personal contributions where a tax deduction is claimed must fall under $25,000.

However, if your superannuation balance is less than $500,000 at June 30 of the previous financial year, you are eligible to make “catch up” contributions for any unused portion of the $25,000 cap from the previous five years.

The catch up is available from July 1, 2018, therefore you can only access unused concessional contributions from 2018/19 financial year in the 2019/20 financial year.

Use it or lose it!

One thing to note from the catch up concession is that it is like most muscles in the body… if you don’t use it, you’ll lose it. You will be able to access your unused concessional contribution cap on a rolling basis for five years. Any amounts unused after five years will expire.

You’re probably wondering what you should be doing now, seeing that we are well over halfway through the 2017/18 financial year.

Unfortunately, any shortfalls from the 2017/18 concessional cap are to be disregarded as it predates the commencement of the catch up amendment.

It’s worth checking to ensure that your concessional contributions will not exceed $25,000 at June 30, 2018.

If you have salary sacrifice set up at work, speak with your payroll officer or if you are a sole proprietor, seek advice from your accountant or financial advisor as to how you can benefit from these new changes.

For more information about Self-Managed Superfunds, speak to Danielle Stevens at Peak Super today.