Matthew Richardson, SMSF manager for Accurium, said in a webinar in December that catch-up concessional contributions are effectively a way to use unused contribution caps from prior years to make a larger concessional contribution in the current year.
“For someone to be eligible to carry forward those unused concessional contributions, the member needs to have a total super balance of less than $500,000 as at the prior 30 June, and of course, have unused caps from the prior year,” Richardson said.
“If they have used their maximum cap in each of the five prior years, then obviously they have nothing unused to carry forward, because you can only go back five years before this.”
Richardson said the rules around this strategy include using the oldest unused cap amounts first, unused cap amounts are only available for five years and will then expire, and unused concessional cap amounts are applied automatically once the member exceeds the cap in any year. This means the standard cap for the year is used first before applying the unused cap amount.
He explained how this could work for a member looking at the 2025-26 year where the standard cap is $30,000, but they have unused contributions from prior years.
“If we look at what that would mean now, if the member wants to make use of unused carry forward space, you go back five years to 2021 and see what they used that year,” he said.
“Let’s say they did $10,000 in concessional contributions, so there was $15,000 carried forward. You then go through each of the years moving forward and see how much they used each year and how much was unused. Of course, you account for the increase in indexation as well as the contribution cap.”
Richardson continued the example, noting that their contribution cap for each year increases taking into account what was unused in the prior years.
“Let’s then say that in the 2024-25 year the member’s balance was over $500,000 prior to 30 June, which means they would still have access to their regular contribution cap in that year, but couldn’t have used any bring forward,” he said.
“Then in the 2025-26 year their total super balance as at the prior 30 June is now back below $500,000 and that means they have their current year contribution cap of $30,000 but also all the unused caps from the prior years.
“Just like carrying forward a capital loss, even if you don’t have anything to use it against in a year, or you can’t use it, you don’t just lose it. It still gets carried forward, like in this case.”
He added that this means that the member, instead of being able to make a $30,000 in concessional contributions for the 2025-26 year, could make a higher concessional contribution based on what they have not used in the prior years.
