How to use the new super catch-up rules

From July 1, averaging for concessional contributions, or “five-year catch-up provisions” start


It’s never seemed quite fair that those making a one-off capital gain couldn’t get a little extra into super to help with capital gains tax. And, as we all know, women end up with lower super balances because they tend to spend periods out of the workforce then can’t catch up. But there is actually a wide range of people that can be disadvantaged by super contribution caps … now all that is about to change.

From July 1, we get averaging for concessional contributions, also known as the “five-year catch-up provisions”.

In essence, these will be a rolling five-year average, but you can only catch up in the past. That is, you can’t put in, say, $50,000 to cover the current year’s limit, plus the following year. You could put in $50,000 if you wanted to cover this year and, say, the previous year, if you hadn’t made any CCs. Or for any year in the three years prior to that one also.

There are a few points to note about the new rules.

• First, you will only be able to use these five-year provisions if you have less than a total of $500,000 in super. Above that you are restricted to the same annual, use-it-or-lose-it, $25,000 CC limit as everyone else.

• Second, this new rule will gain most of its power for employees because of the removal of another rule — the “10 per cent rule”.

The 10 per cent rule meant that anyone who earned more than 10 per cent of their income from being an employee could not make personal deductible contributions. They had to, in effect, use salary sacrifice through their employers.

This changes apply from July 1. Anyone will be able to make CCs up to their limit, simply by contributing to super.

• Third, it is only on July 1, 2017 (that is, the start of FY18) that the rule begins to work. You won’t be able to start making extra contributions to make up for previous years until after FY19 begins, where you will be able to make contributions going back to FY18. It won’t be fully operational until FY22, when people will be potentially able to contribute for the four prior years (FY21, FY20, FY19 and FY18).

So, where are the real advantages of this new rule?

Deal for self-employed

For the self-employed, particularly in the early years of operation, income can be very lumpy from one year to the next.

If the net income available for you to take home is only $40,000 for a given year, then opting to put some of that into super could be a tough decision to make, particularly if your personal annual expenses are higher than that and you haven’t earned enough to meet those expenses.

But the following year (or some year in the next couple of years) comes, with a better income, of say $175,000, then making a total of $25,000 of contributions might be easier. You will also have the flexibility to make extra contributions to make up for previous year shortfalls.

Then there is the straight tax management for those self-employed people whose income regularly flops either side of the top marginal tax rate, which kicks in at $180,000.

If income bounces from $150,000 to $250,000 over the course of several years, it could make sense to pay larger amounts of super when closer to the top end of that range, and less when near the bottom en

Capital gains tax help

Made a big capital gain? Have some room left in your cap via the five-year catch-up rules? Here’s how it can save you tax.

Let’s fast forward to the 2022 financial year. You’re an employee and your employer has been putting in $10,000 in CCs for you each year. But that’s all the contributions that have been made on your behalf.

Between FY18 and FY22, your CCs would have amounted to $50,000 of a total of $125,000 in caps over that period

By Bruce Brammall, The Australian  20 June 2017


So, how do the catch-up provisions for unused Concessional Contributions work? And how can these unused Concessional Contributions be carried-forward?

This article will explain the conditions that need to be met so that an individual can utilise the Concessional Contribution catch-up rules without exceeding the Concessional Contribution cap.

The Concessional Contribution catch-up rules were initially announced by the Government on 15 September 2016 and will take affect from 1 July 2018.

The legislation supporting the carry-forward of the unused Concessional Contribution cap rules received Royal Assent on the 29th of November 2016.

Here is a link to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016.

So, let’s get into what the rules mean and how they are applied.

Carry Forward and Catch Up of Unused Concessional Contribution Cap

From 1 July 2018, individuals with superannuation balances below $500,000 will be able to carry forward any unused portion of their Concessional Contribution cap for up to 5 years (rolling period). This catch-up provision therefore can be first utilised from 1 July 2019 (the financial year after the first year of being able to accumulate unused Concessional Contributions).

Any carried forward amounts that are not used within 5 years will expire and be forfeited.

What is the Concessional Contribution Cap?

The superannuation Concessional Contribution cap is currently $25,000 p.a. (financial year). This amount is intended to be indexed in line with Average Weekly Ordinary Time Earnings (AWOTE) in increments of $2,500 (rounded down).

What are Concessional Contributions?

A Concessional Contribution is a contribution received into a superannuation account where the contributor claimed a tax deduction. This includes self-employed contributions, mandatory superannuation guarantee (SG) contributions, salary sacrifice contributions and personal deductible contributions.

Example of Carry Forward Unused Concessional Contribution Cap

Let’s assume a person with a superannuation balance of less than $500,000 contributes $20,000 as a Concessional Contribution in the financial year commencing 1 July 2018 and then contributes $15,000 into superannuation as a Concessional Contributions in the financial year commencing 1 July 2019.

Assuming that the cap is still $25,000 (i.e. no indexation), this person will be able to carry forward $5,000 of their unused Concessional Contribution cap from the 2018/19 financial year and use it at any stage until the end of the 2023/24 financial year. Further, they can carry forward $10,000 of their unused Concessional Contribution cap from the 2019/20 financial year and use it at any stage until the end of the 2024/25 financial year under the catch-up provisions.

This is shown in the table below:

Year 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24
General Concessional Contribution Cap 25 000 25 000 25 000 25 000 25 000 25 000
Revised Cap Incl. Unused Cap 25 000 30 000 40 000 37 000 30 000 25 000
Actual Concessional Contribution 20 000 15 000 28 000 32 000 30 000 25 000

How Are Unused Concessional Contributions Applied?

In practice, an individual’s Concessional Contribution Cap in any given year is increased (on top of the standard Concessional Contribution cap) by any unused portion of the cap from the previous 5 financial years, but reduced by any use of the those unused portions during that period. Therefore Concessional Contributions above the general cap can be made without it creating Excess Concessional Contributions.

When Does The $500,000 Balance Rule Apply?

An individual’s superannuation balance at the beginning of the financial year determines whether they are able to use the Concessional Contribution catch up provisions. For example, if their balance on 1 July 2021 (in the example above) was $510,000, their Concessional Contribution cap would not be inflated to $37,000 as a result of unused carried-forward Concessional Contributions. Instead, it would remain at the standard $25,000, due to that person’s superannuation balance exceeding $500,000.


Hypothetically, if that same person’s superannuation balance fell to below $500,000 by 1 July 2022, my interpretation of the rule would suggest that any unused amount of the carried forward Concessional Contribution cap could once again be utilised.

Click here to read from the Federal Register of Legislation – See schedule 6 Subsection 291-20.

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