Making the most of concessional contributions

In Australia, as at the time of writing – the current annual cap for contributing money concessionally to superannuation is $30,000 per year.

A concessional contribution to superannuation is a contribution that is generally a “lower tax” than what you may pay if you receive the income and pay tax at your normal marginal rate. Obviously in most cases if you are only earning let’s say $10,000 of income in a year – then it may not be worth it to you as the tax on a concessional contribution is 15% whereas personally if your only income is $10,000 – you will pay no tax. If your marginal tax rate is 30% or higher it starts to make more sense to concessionally contribute to super. Keep in mind things like what your employer already has put in counts to the annual cap and also amounts contributed can’t be accessed until a condition of release is met of superannuation.

If we rewind time back to 2007/2008 – the annual cap for someone aged 50 or less was $50,000 per year and over 50 was $100,000 per year (so quite generous!). Overtime the rules have changed and from 2017/2018 it was just a blanket $25,000 for all individuals. Since then it has slowly increased and is now at $30,000 for the year. All though the rules have changed over time – it is important to make the most of now and there are other rules and limits that can be added onto your normal annual limit such as the ability to “carry forward unused concessional amounts”.

This means effectively you can catch-up amounts you haven’t previously contributed in the last 5 financial years. There are some rules around ages and also total super balance requirements you need to meet. However, it is important to review your situation to see if it is worth it as this rule was brought in from 1st of July 2018 (to start accumulating unused amounts) and now the 2018/2019 financial year is past the 5 year mark so amounts you have unused for that financial year now fall off and can never be caught up again. Likewise, this is the last year to make the most of amounts you haven’t contributed in the 2019/2020 financial year.