Catch-up on your unused concessional contributions caps
What is a carry-forward concessional contribution?
An annual cap of $25,000 applies to concessional (before-tax) super contributions.
It used to be a case of ‘use it or lose it’ – if for any reason you couldn’t contribute the maximum annual concessional contribution amount to your super, the opportunity was lost.
Under the carry-forward concessional contributions rules, which came into effect on 1 July 2018, you can accumulate unused concessional contributions and carry them forward, to be used in future years.
Who stands to benefit?
Before the carry-forward rules were introduced, the annual concessional contribution caps offered little flexibility for people who have periods in which they make little or no super contributions. This includes people who take time out of work, work part-time, or have ‘lumpy’ income. Allowing people to carry forward unused concessional cap amounts provides an opportunity to ‘catch-up’ if you have the capacity to do so.
To make use of the carry-forward concessional contributions, your total Super Balance at 30 June must be under $500,000. Your Total Super Balance is calculated by adding together all the amounts you have in accumulation phase of super, plus the retirement phase value of your super and any rollovers in transit between super funds at 30 June.
How does it work?
Only unused amounts from 1 July 2018 onward can be carried forward. For example, if in 2018-19 you contributed $15,000 you will carry forward $10,000. In the 2019-2020 financial year, your concessional contributions cap will increase from $25,000 to $35,000.
Eligible people are able to access their unused concessional contributions cap space on a rolling basis for a period of five years. Any unused concessional contributions cap amount is applied in order from the earliest year to the most recent year. Amounts that have not been used after five years will expire.
A simple example
In 2018-2019, Marguerita reduced her working hours to care for her infant. In August 2019 Marguerita resumed full-time work. She was keen to catch-up on her super contributions as far as she could afford to.
Marguerita’s Total Super Balance on 30 June 2018 was $200,000, so she is eligible to utilse the carry-forward rules.
In 2018-2019 Marguerita made total concessional contributions of $10,000. This means than in 2019-2020 she has the ability to make concessional contributions of $40,000. Of this, $25,000 is her general concessional contributions cap and $15,000 is her used amount from 2018-2019 which has been carried forward.
If you’d like to take advantage of the carry-forward concessional contribution rules, the first step is to check that your Total Super Balance is under $500,000. The easiest way to do this is to contact your super fund (or funds, if you have you super in more than one place). You’ll also find the latest balances reported to the ATO through the MyGov online service.
Once you’ve confirmed that you’re eligible, you’ll need to work out the amount you have available to carry forward. This means looking at the concessional contributions for previous years (2018-2019 onward) compared to the concessional contributions cap in that year. Your super statements will detail your concessional contributions, or you can contact your super fund and ask them to confirm the amount for you.
Once you’ve worked out how you’d like to use the carry-forward provisions, liaise with your super fund and find out how to make your personal contribution.