Can you benefit from catch-up super contributions?

It’s that time of year when people are looking for tax deductions.   The relatively new catch-up concessional contribution system may be ideal for some.

Long gone are the days when contributions of more than $100,000 could be made into super.

And now that the deducible contribution limit is just $27,500 it just doesn’t leave much to fund for retirement after taking out 15% contribution tax and life insurance premiums.  And this low limit becomes more of problem if one doesn’t use their limit in any year(s).

This low limit particularly hurts those who leave the workforce to bring up children.  The same can also be said for those who have a couple of tough years financially.  This is particularly true of many Victorian business owners during covid and beyond.

The catch up concessional system allows some to contribute more than the $27,500 limit for which a tax deduction can be claimed for the full amount.

To qualify to make a catch-up concessional contribution before 30th June 2024 one must:-

  • Have less than $500,000 in super as at 30th June 2023.
  • Not used all of one’s limit in any year from 2018/19 to 2022/23.
  • Must qualify to be able to make a contribution.

This year is particularly important as it is the first year an unused year will drop off.  That is, if you didn’t have concessional contributions of $25,000 accepted by your super fund(s) in the 2018/19 year, that shortfall will be lost if not used by the end of this month.

Things to be wary or mindful of:-

  • Some super funds cease accepting contributions by Monday 24th
  • The 30th June falls on a Sunday. Those with their own self managed super fund need to avoid making a contribution (banking transfer) after cut off time on Friday 28th June as it will be treated as a contribution in July.  That is next financial year.
  • And that problem becomes doubly worse if you are not able to make a contribution in July 2024.
  • A contribution may not suit you from a tax perspective this year as your income may be too low.
  • Or perhaps it is a good year to trigger a capital gain.
  • Those with incomes over $250,000 need to be mindful of the extra 15% tax on contributions (and be mindful of how Section 293 income is defined).
  • A catch-up concessional contribution cannot be accessed one satisfies what is called a “condition of release” is satisfied (with the main one becoming retired).

So there are many factors to take into consideration.

Whether you should or shouldn’t make a catch up concessional contribution is best done by receiving personal financial planning advice.  Such personal advice will address your current situation and future goals and needs.  Please let us know if you would like a referral.

 

 

At MRS, we will spend today planning for your success.