Carry Forward Concessional Contributions
Understanding the Basics
Since 1 July 2018, people have been able to carry forward unused concessional contribution caps to future financial years. These rules were introduced to give individuals more flexibility in managing their superannuation, particularly if their income (and capacity to contribute) fluctuates over time.
Concessional contributions include employer Super Guarantee (SG) contributions, salary sacrifice contributions, and personal contributions claimed as a tax deduction. Normally, the cap is $30,000 per year (2024/25), but with carry-forward rules, you may be able to contribute more.
How It Works
Eligibility: To use your carry-forward concessional contributions, your total superannuation balance must be below $500,000 on 30 June of the previous financial year.
Five-Year Rule: Unused concessional contributions can be carried forward for up to five years. After that, they expire.
Order of Use: When you make extra contributions, the system applies your oldest unused cap first.
Strategic Opportunities
Tax Planning: If you expect a higher income year (bonus, capital gain, or business sale), you can tip more into super to offset your tax liability.
Wealth Accumulation: This is particularly helpful for those who had career breaks or part-time work, allowing them to catch up later.
Retirement Boost: People nearing retirement can supercharge their balances in the last decade of work, making the most of concessional tax rates.
Considerations
Contributions above your available cap may be taxed at your marginal rate.
Non-concessional contributions (after-tax) are subject to separate caps and can’t be carried forward in the same way.
Timing is everything, it is easy to lose track of what cap is available from each relevant financial year. Be sure to confirm your limits through either your ATO MyGov portal or with your Tax Accountant.
Why This Matters
For many people, superannuation will be their largest financial asset outside of the family home. Understanding and using the carry forward concessional rules can make a significant difference in retirement outcomes.
As advisers, we encourage clients to review their super contributions regularly, seek assistance to model different scenarios, and align strategies with both tax efficiency and long term retirement goals.
Bobby Ho B.Com(Fin/Mkt), DFS(FP), GDipPA, CPA, SSA
Senior Financial Adviser
(03) 9650 9762
bobbyh@lanteri.com.au
Ground Floor, 1 Collins Street Melbourne Victoria 3000 Australia