Carry-forward Concessional Contributions
A reminder about the ability to make further super contributions and claim a tax deduction for them.
Where superannuation is paid on your behalf and claimed as a tax deduction, either by you or your employer, the maximum annual contribution is capped at $25,000.
From 1 July 2018, individuals who have a total super balance of less than $500,000 can carry forward any unused cap to the next financial year on a rolling five-year period.
For example, your employer contributed $5,000 of superannuation guarantee on your behalf in 2019 and you made a personal contribution of a further $10,000 and claimed a tax deduction in your personal return. You have therefore only used $15,000 of your $25,000 cap. In 2020, you can contribute a maximum of $35,000 being the 2020 cap of $25,000 plus your unused cap from 2019 of $10,000.
So, let’s say in 2020 the employer contributed $10,000 and you did nothing. The position now looks like this:
|Carry forward Unused Cap||0||10000||25000||50000||75000|
|Unused Cap at Year End||10000||25000||50000||75000||100000|
For the 2021 year, you now have an unused cap of $50,000. The availability of this mechanism is a very powerful strategy to use for several reasons, including the ability to increase your super balance, reduce your taxable income and /or manage effects of once-off taxable events like capital gains.