Carry Forward Rules for Super Contributions

If your superannuation fund balance is less than $500,000, a new rule means you are now able to carry forward any unused concessional contribution from prior years into following years. This allows you to maximise the tax benefits of contributing the upper limit concessional amount.

It also gives you some flexibility with being able to contribute more in years that you have the cash flow to do so. This is useful for people whose income has been interrupted or for those who receive larger than usual income some years.

Once your fund balance reaches $500,000 you won’t be able to carry forward unused amounts. Also, unused balances can only be carried forward for up to five years.

The new rule applies from 1 July 2018. This means that the 2020 financial year is the first year in which you can top-up your super contributions by the carry forward amount. In 2021, there will be two years of unused balance available to carry forward and so on, up to a maximum of five years balance to carry forward in the 2024 financial year. Assuming the law doesn’t change, the five-year expiry rule will continue from then.

What are Concessional Contributions?

Concessional superannuation contributions are those made to your super fund before tax. This includes compulsory employer superannuation guarantee contributions, additional employer before-tax super and salary sacrifice amounts.

It may also include personal contributions you make as tax deductions, for example, sole traders who contribute to their own super fund.

Roll Over Unused Concessional Balance Example

If you contributed $15,000 in the 2019 financial year and $15,000 in 2020 financial year, and your fund balance is less than $500,000, you can contribute an extra $20,000 in the 2021 financial year, above the usual $25,000 concessional cap, bringing the total for 2021 to $45,000.

As another example, let’s say as a self-employed person you did not contribute any superannuation for 2019 to 2023. In the 2024 financial year, you could then contribute $125,000 to catch up to the allowable concessional contribution cap for the previous five years.

Concessional Contributions Checklist

1. Check your superannuation balance as at 30 June 2020. Was it less than $500,000?
2. What did you contribute to super in the 2019 & 2020 financial year?
3. If you contributed less than $25,000 in 2019 & $20,000 and you have available cash flow, consider topping up to the threshold, even if you don’t pay the full $25,000 this tax year. You can always carry forward this year’s threshold balance and top-up in a future year.
4. What is the last date your super fund will accept payments? It will probably be at least a week before the end of the financial year.

Get advice before making extra contributions

If you contribute too much to your super fund you may end up with a tax bill! If you’re keen to get the tax benefits of maximum contributions, contact us now before your super fund deadline and we’ll help you build your super balance. We can also help you start planning for the following year’s contributions.

ThinkWiser Accountants is an Accounting firm based in the northern suburbs of Melbourne and provides Accounting, Bookkeeping and Taxation services to small businesses & individuals.