If you have not fully used your concessional cap in a prior financial year, you may be eligible to use these unused carried forward amounts in a later year.
Depending on your circumstances, this could help you to maximise tax-effective super contributions and invest more for retirement.
If your concessional contributions (CCs) in a financial year are below the annual CC cap, you’re able to accrue these unused amounts and carry them forward. This applies to unused cap amounts since 1 July 2018 and can be carried forward for up to five years. This means if you meet certain eligibility rules, you’ll be able to make larger CCs in a later financial year.
This may give you greater flexibility to make larger CCs when your circumstances allow. This may be helpful if, for example, you have irregular employment income, fluctuating income or have had time out of the workforce.
The amount you contribute is generally taxed at the concessional rate of up to 15%1. Once contributed, any earnings are also taxed at a concessional rate of 15%, rather than your marginal rate, which could be up to 47%2. Depending on your circumstances, this strategy could result in a tax saving of up to 32% and enable you to increase your super savings.
To be eligible to utilise your carried forward unused CCs by making a catch-up contribution you must:
The first financial year you could accrue unused CCs was in 2018/19. Unused CC amounts can be carried forward for up to five years before they expire.
Your financial adviser can help determine whether this strategy is right for you. They can also help you to work out what your available carried forward unused CC balance4 is and how much you’re eligible to contribute. Additional tax and other penalties may apply if you make contributions that exceed your available cap.
To work out your carried forward amounts, you need to confirm the total amount of CCs you have made in each financial year since 1 July 2018. You can access information about your contributions by logging on to my.gov.au. Information displayed might not be up to date, so it is also important to keep accurate contributions records and enquire directly to your super fund before contributing.
In 2018/19 and 2019/20, Fatima made CCs of $15,000, which was $10,000 less than the annual CC cap of $25,000.
Fatima took 12 months maternity leave from 1 July 2020 and didn’t make any CCs in FY 2020/21.
From 1 July 2021, Fatima returns to full-time work where her employer contributions (CCs) total $15,000 in 2021/22. This is $12,500 less than the annual cap that applies in this financial year ($27,500).
Fatima receives an inheritance of $35,000 in 2021/22 that she wants to contribute to super. The table below shows how she can carry forward unused CCs to make catch up contributions in 2021/22 in later years.
Annual CC cap amount
Total CC cap including any carried forward CCs
Unused CCs that may be carried forward
If you aren't sure how to proceed or if you meet the specific criteria...
Speak with one of our Financial Planners about the best approach for your circumstances asap, either book a meeting or get in contact with us on 02 9328 0876.
1 Individuals with income from certain sources above $250,000 in FY 2021/22 will pay an additional 15% tax on salary sacrifice, personal deductible and other CCs within your cap.
2 Includes Medicare levy.
3 Your ‘total superannuation balance’ includes all of your super accumulation interests and amounts held in superannuation income stream products. For more information, visit ato.gov.au, and check your total super balance by logging into my.gov.au.
4 You can also obtain this information by logging into my.gov.au
General Disclaimer: While every care has been taken in the preparation of this document, Sydney Financial Planning and Charter FP make no representations or warranties as to the accuracy or completeness of any statement in it.This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Please seek personal financial advice prior to acting on this information.