Retirement planning may not always feel like a priority, but making informed decisions about your superannuation contributions can have a profound impact on your future financial security. One key strategy available to Australians is the use of catch-up contributions. This tool can be a game-changer for maximising your retirement savings while taking advantage of valuable tax benefits. Whether you’re just starting your career or already earning a high income, this article will show you how to make the most of catch-up contributions and build a stronger financial foundation.

What Are Catch-Up Contributions?

Catch-up contributions allow eligible Australians to contribute extra funds to their superannuation by using unused concessional contributions from previous financial years. Concessional contributions include contributions made by your employer (such as the compulsory super guarantee) and any salary-sacrificed or personal deductible contributions that meet ATO guidelines.

Since the 2018–2019 financial year, Australians can carry forward any unused concessional contributions from up to five prior financial years, provided their total superannuation balance is below $500,000 at the end of the previous financial year.

This means, for example, if you didn’t fully utilise the concessional contributions cap in prior years, you can contribute extra in the current financial year to catch up. This lowers your taxable income and increases your retirement savings—an opportunity that shouldn’t be overlooked.

Who Is Eligible for Catch-Up Contributions?

To take advantage of catch-up contributions, you need to meet four main criteria:

• You have a total superannuation balance of less than $500,000 as of June 30 of the prior financial year.

• You have unused concessional contributions left from previous years (starting from the 2018–2019 financial year onwards).

• You are contributing within your concessional contributions cap, inclusive of any carry-forward amounts.

• Additional age restrictions apply if you’re over 75; consult a financial adviser to discuss eligibility.

Using Catch-Up Contributions to Boost Your Super

• For Young Professionals

Starting your career may mean lower earnings, leaving little room to make extra super contributions. But as you earn more during your late 20s and 30s, strategic catch-up contributions can help you recover lost opportunities.

For example:

• Sarah, a young professional in her early 30s, only contributed $15,000 in concessional contributions in the 2021–2022 financial year, leaving $12,500 of unused cap. By carrying forward this unused amount, Sarah can contribute up to $40,000 in concessional contributions this year ($27,500 standard cap + $12,500 unused).

This approach not only boosts Sarah’s tax benefits but also helps her capitalise on compound interest, which significantly amplifies her retirement savings over time.

• For Families with Variable Income

Busy families often deprioritise super contributions because of immediate financial commitments like childcare and housing costs. With catch-up contributions:

• Parents who take time off work (e.g., for maternity or paternity leave, resulting in lower concessional contributions) can bolster their super when they’re earning higher incomes again.

Real-life example:

• James, a father who paused work for a year to care for his child, only contributed $10,000 in super during that time. Three years later, he resumed full-time employment and leveraged his unused contributions cap to add $50,000 to his superannuation account over two years. This not only benefited his savings but also reduced his taxable income, offering more relief for his growing family.

Maximising Tax Benefits Through Catch-Up Contributions

Beyond increasing your superannuation balance, catch-up contributions present valuable tax-saving opportunities. Concessional contributions are generally taxed at just 15%, which is lower than most people’s marginal tax rate. This means:

• Instead of paying up to 47% tax on that portion of income, you’ll pay only 15% by contributing to your super.

For example:

• Emma earns $150,000 annually, placing her in the 37% tax bracket. If she contributes an additional $20,000 to her super as catch-up contributions, she saves $4,400 in tax while boosting her retirement savings.

Aligning Catch-Up Contributions with Long-Term Retirement Goals

While catch-up contributions are an excellent strategy, they work best when integrated into a holistic retirement plan:

• Set clear goals for your retirement savings and assess how additional contributions can help you meet them.

• Work with a financial adviser to determine the optimal amount to contribute while balancing short-term cash flow needs.

• Revisit your strategy annually to account for changes in income, superannuation caps, or financial objectives.

Plan Your Catch-Up Strategy Today

The earlier you take advantage of catch-up contributions, the better positioned you’ll be to reap the rewards of compound interest and tax savings. Whether you’re a young professional just starting to invest in your super, a busy family managing fluctuating finances, or a high-income earner seeking smarter tax strategies, these contributions offer tailored benefits for every stage of life.

If you’re unsure where to start or how catch-up contributions could work for your unique situation, consult a financial adviser or super consultant to map out a plan. Don’t miss this opportunity to make the most of your unused concessional contributions—your future self will thank you!

Building a robust superannuation balance isn’t just about meeting retirement needs; it’s about creating the life you dream of for tomorrow. By leveraging catch-up contributions, you can take control of your financial future one step at a time.

If you would like to improve your current investment strategies or are looking to start your investment journey, click here to organise a complimentary 20-minute phone call with an EPG Wealth adviser.

Explore more articles