Boost Your Super with Unused Concessional Contributions

Superannuation is one of the most tax effective ways to invest your hard-earned money. One way to accelerate your super growth is by utilising the carry-forward concessional contributions rule. This Australian Taxation Office (ATO) initiative allows you to make up for unused concessional contributions from previous years, potentially giving your retirement savings a significant boost while reducing your tax bill at the same time.

What are Carry-Forward Concessional Contributions?

The concessional contributions cap is the maximum amount you can contribute to your super each year with concessional tax treatment. This includes employer superannuation guarantee payments, salary sacrifice contributions, and any superannuation contributions for which you have claimed a tax deduction. Any unused portion of this cap can be carried forward for up to five years (from 1 July 2018), provided your total superannuation balance is less than $500,000 on 30 June of the previous financial year.

Who Can Benefit from Carry-Forward Concessional Contributions?

Here are some situations where carrying forward unused concessional contributions can be a smart financial move. 

• Approaching the $500,000 Super Balance Threshold: If your super balance is nearing $500,000, consider utilising unused concessional contributions from previous years before losing eligibility. This can help maximise your super growth before the carry-forward option is no longer available.
• Capital Gains Event: Sold an asset at a profit this financial year? A capital gain can push you into a higher tax bracket. Carry-forward contributions can help offset this by reducing your taxable income while boosting your super.
• Improved Financial Position: Perhaps you’ve recently paid off debt or received a bonus. If you’re in a good financial position, carrying forward unused concessional contributions allows you to contribute more to your super while reducing your taxable income, offering a double benefit.

Example 1: Maximising Before You Hit $500,000

Let’s say Sarah has a total super balance of $480,000 as of 30 June 2023 and $10,000 of unused concessional contributions from the previous two financial years. The current concessional cap is $27,500 for the 2024 financial year. By utilising the carry-forward rule, Sarah can contribute $37,500 ($27,500 + $10,000) for the 2024 financial year including any employer super contributions, accelerating her superannuation growth before her balance surpasses the $500,000 threshold.

Example 2: Offsetting Capital Gains Tax

John recently sold an investment property and made a capital gain of $50,000. This pushes him into the 47% tax bracket. John has $10,000 of unused concessional contributions from the previous year. By contributing this amount to his super, John reduces his taxable income by $10,000, saving him tax and boosting his super.

Taking Advantage of Carry-Forward Concessional Contributions

If you think you might benefit from carrying forward unused concessional contributions, talking to a financial adviser can be a wise decision. Financial advisers help you assess your eligibility, calculate potential tax savings, and help manage the process of claiming a tax deduction, which can otherwise be tricky.

Remember

• The carry-forward rule applies to unused contributions from the previous five financial years.
• To be eligible, you must have a total superannuation balance of less than $500,000 at the end of the previous financial year.
• Unused contributions expire after five years. Use it or lose it!
• Superannuation contributions are taxed at 15%, or potentially 30% if Div 293 tax applies where you’re earning over $250,000 including your superannuation contributions and other income.

Don’t miss out on this valuable opportunity to boost your super! Contact us today and let’s discuss how carry-forward concessional contributions might influence your strategy moving forward.