If you haven’t been making full use of your concessional contributions cap in previous years, you might be sitting on an opportunity to lower your tax bill while boosting your superannuation.
The Australian Taxation Office (ATO) allows individuals to carry forward unused concessional contributions for up to five years, providing a great way to make catch-up contributions when financially convenient. Here’s how it works and how you can take advantage of it.
What Are Concessional Contributions?
Concessional contributions are before-tax contributions made into your super fund. These include:
Employer Super Guarantee (SG) contributions
Salary sacrifice contributions
Personal deductible contributions
The annual concessional contributions cap is currently $30,000 per year (as of 2024-25). However, if you didn’t use your full cap in a previous year, you may be eligible to carry forward the unused amount.
How Do Unused Concessional Contributions Work?
If your total superannuation balance is under $500,000 as of 30 June of the previous financial year, you can use your unused concessional contributions from the past five years.
Example Scenario
Let’s assume we are in the 2023-24 Financial year (concessional contributions cap in this financial year was $27,500). Let’s say you contributed the following amounts in previous years:
Financial Year | Annual Cap | Contributions Made | Unused Amount |
2019-20 | $25,000 | $15,000 | $10,000 |
2020-21 | $25,000 | $20,000 | $5,000 |
2021-22 | $27,500 | $22,500 | $5,000 |
2022-23 | $27,500 | $27,500 | $0 |
In 2023-24, your total unused contributions from previous years add up to $20,000. If your super balance is under $500,000, you could contribute up to $47,500 ($27,500 + $20,000) and claim a tax deduction.
Benefits of Using Unused Concessional Contributions
Reduce Taxable Income: Personal deductible contributions can lower your assessable income, potentially moving you into a lower tax bracket.
Boost Super Savings: Helps grow your retirement savings faster without exceeding annual caps.
Flexibility: Allows you to make larger contributions in high-income years while staying within concessional limits.
How to Make a Catch-Up Contribution
1. Check Your Unused Concessional Contributions via the ATO myGov portal or ask your super fund.
2. Confirm Your Total Super Balance to ensure it’s under $500,000.
3. Make a Personal Contribution to your super fund before 30 June.
4. Lodge a “Notice of Intent to Claim a Deduction” with your super fund before filing your tax return.
5. Claim the Deduction in Your Tax Return to reduce your taxable income.
Is It Right for You?
Using carry-forward concessional contributions can be a smart tax strategy, but it depends on your circumstances. If you expect a higher income this year or have capital gains, this strategy could help offset some of your tax liability.
However, consider factors like contribution timing, Division 293 tax (for high-income earners), and cash flow needs before making extra contributions.
Final Thoughts
Unused concessional contributions provide a valuable opportunity to reduce tax and boost retirement savings. If you’re in a position to take advantage of them, it’s worth reviewing your super contributions and speaking with a tax professional to ensure it aligns with your financial goals.
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