From 1 July 2018, if you have a total super balance of less than $500,000 on the previous 30 June and you make or receive concessional contributions (CCs) of less than the concessional contributions cap of $25,000 per annum, you may be able to accrue unused amounts for use in subsequent financial years.
2018/19 is the first financial year you can carry forward unused cap amounts and these amounts can be used from 1 July 2019. Unused cap amounts can be carried forward for up to five years.
To explain further, the standard concessional contribution (CC) cap is $25,000, however, the carry forward rule has the effect of increasing the cap. Which means depending upon your prior years’ SG contributions, salary sacrificed contributions and carry forward CC your cap may be now anywhere between $25,000 and $150,000 at year 5:
|Income year||Maximum* CC cap with carry forward rule|
|2019–20||$25,000 to $50,000|
|2020–21||$25,000 to $75,000|
|2021–22||$25,000 to $100,000|
|2022–23||$25,000 to $125,000|
|from 2023–24||$25,000 to $150,000|
Prior to these amendments, if an individual did not fully utilise their annual CC cap in a financial year, they could not carry forward the unused cap to a later year. This rule constitutes an exception to the usual rule when it comes to concessional contributions: ‘Use it or lose it’.
As with anything related to superannuation, the rules are complex rules and conditions always apply because of the concessionally-taxed environment proffered by Australia’s superannuation laws.
Notwithstanding this, the carry forward rule has a few benefits worth considering:
- the ability to utilise otherwise unapplied unused CC caps;
- the ability to increase amounts held in superannuation;
- the potential to increase deductions for personal contributions, beyond the standard $25,000 cap; and
- the potential to move deductions for personal contributions to a later financial year which may suit the timing of an expected higher taxable income.