A few years ago, new rules were introduced that allow eligible taxpayers to make extra concessional superannuation contributions above the general concessional cap which is currently $27,500 PA.
This involves accessing unused concessional cap amounts from previous years.
A concessional contribution is defined as a contribution to your superfund before tax. They are taxed at a flat rate of 15% in your super fund.
Concessional contributions can come from several sources such as:
- contributions from your employer
- pre-tax salary sacrificed contributions you’ve elected to make through your employer
- contributions you have made personally where you claim a tax deduction for those contributions
The combined total of the contributions from each of the above sources is counted towards your concessional contribution cap (which is $27,500 for both 2023 & 2024 FY).
The carry-forward arrangements involve accessing unused concessional cap amounts from previous years. An unused cap amount occurs when the concessional contributions you made in a financial year were less than your general concessional contributions cap.
The new rules allow taxpayers the opportunity to calculate the ‘unused’ portion of their concessional contributions cap in each financial year going back to 1 July 2018.
Once calculated, the unused portion of a taxpayer’s concessional cap can be used in a later financial year which can achieve a better tax outcome for that financial year, and at the same time, maximise the amount that is contributed to superannuation.
To use your unused cap amounts you need to meet 2 conditions:
- your total superannuation balance at the end of 30 June of the previous financial year is less than $500,000
- you made concessional contributions in the financial year that exceeded your general concessional contributions cap.
The oldest available unused cap amounts are used first.
Unused concessional cap amounts can only be carried forward for a maximum of five years. After five years, the unused amounts expire.
Therefore, any unused cap amounts from the 2019 FY must be claimed in the 2024 FY otherwise this opportunity is lost forever.
What are the benefits to you?
- Provides an opportunity to claim a tax deduction in excess of the usual concessional superannuation cap of $27,500.
- This is effectively a tax deduction for contributing to your retirement savings.
- Allows you to make up for earlier years when you didn’t utilise the contribution caps or did not have the funds to do so
- Flexibility in making contributions at a time that suits your personal circumstances such as:
- When you have an abnormally high income from the sale of a capital asset
- Abnormally high income from trading conditions
- Allows you to boost your superannuation balance at a time when you have the financial resources to do so
- Allows you to better provide for your retirement
1) This blog is not intended for the purpose of giving investment advice. We recommend you seek advice from a qualified Investment Advisor.
2) Our comments are general in nature and may/may not apply to your specific circumstances. Please seek our specific advice in relation to your own circumstances.