Carrying forward unused concessional contributions

Have you sold a rental property or have a taxable income that needs to be reduced?

There is the ability to contribute to super and use carry forward unused concessional contributions.

It’s never too late to boost your retirement savings

If you feel like you’ve missed the boat when it comes to building your retirement savings, it could be time to use an often-overlooked contribution opportunity.

Making a carry-forward contribution can be an easy way to boost the balance of your super account. Yet it’s one many people ignore.

What is a carry-forward contribution?

Carry-forward contributions are not a special type of super contribution. It’s simply a concept you may not have heard of. There are simply apply rules allowing super fund members to use any of their unused concessional contributions cap (or limit) on a rolling basis for five years.

What does this mean?

If you don’t use the full amount of your concessional contribution cap ($25,000 in 2019/20 and 2020/21), you can carry forward the unused amount. Not only that – you can take advantage of it up to five years later. After five years, any unused amounts expire.

Who can benefit from carry-forward contributions?

Carry-forward contributions were introduced to make it easier for people with non-standard work patterns to save for their retirement. People who take time out from work, work part-time or have big high and low income periods when they make no or limited super contributions.

Generally, this accounts for women who work part-time or take time off to care for children or other family members and people who have time out of the workforce for caring responsibilities, further studies, or due to physical or mental illness.

Annual concessional caps make it difficult to build retirement savings for these groups of people however now it allows them to benefit from the tax concessions available in the super system.

Carry-forward contributions can also be made by people who find they have more disposable income later in life due to reduced household costs, such as mortgage repayments or school fees.

What are the eligibility rules?

To make a carry-forward contribution, your Total Super Balance must be under $500,000 in the previous financial year.

For example, if you want to make a carry-forward concessional contribution in 2020/21, your TSB must have been under $500,000 on 30 June 2020.

TSB is calculated by adding together all the amounts you have in the accumulation phase of super, plus the retirement phase value of your super and any rollovers in transit between super funds at 30 June.

If your TSB falls below $500,000 at a later date, you are once again eligible to apply any of your unused concessional contributions cap in a future financial year.

Find out more about carry-forward contributions on the ATO website or book an appointment with the team to discuss your options.