The Carry Forward Unused Concessional Contribution Cap is a cap that was introduced a number of years ago, allowing those who haven't utilised their full concessional cap in prior financial years, to exceed the standard concessional cap (currently $27,500 in the 2023/24 Financial Year).
Eligibility Requirements
You may be able to make this contribution by meeting both of the below eligibility requirements:
Have a total superannuation balance of less than $500,000 at 30 June of the previous financial year.
Have unused concessional contributions cap amounts from the 5 previous years (from 2018/19 onwards).
These requirements are in addition to the standard requirements for making a concessional contribution.
How does this work?
Whilst the amount of your unused cap will depend on the amounts you have contributed in previous years, you can carry forward unused amounts from up to 5 previous financial years, including when you were not a member (or contributing to) a superannuation fund.
The oldest unused cap amounts are carried forward first. In the current year (2023/24 Financial Year), unused amounts from the 2018/19 year would be used to increase your cap first before unused amounts from 2019/20 and so on.
Why is it important now?
As you are only able to utilise your unused concessional contributions for the last 5 years, starting from the 2018/19 Financial Year, this is the first financial year you are able to fully maximise the cap, utilising all 5 years. Additionally, from 1 July 2024, you will be unable to carry forward the unused portion of your 2018/19 cap due to the expiry of the 5 years period.
A worked example
Sarah has been making contributions to superannuation for a number of years, however took time out of the workforce to care for family. Her contribution history to superannuation, working backwards, is as follows:
Financial Year Contribution
2023/24 $20,000
2022/23 $5,000
2021/22 $0
2020/21 $20,000
2019/20 $15,000
2018/19 $15,000
Sarah recently sold her investment property and would like to know if she can contribute $40,000 surplus funds to reduce the amount of tax payable, in the current financial year.
In this scenario, the following applies:
Sarah utilises her full contribution cap in the current financial year (2023/24).
Sarah has utilised her full carry forward unused concessional contribution cap from the 2018/19, 2019/20 and 2020/21 Financial years.
Sarah has utilised her caps to effectively reduce her tax position in the current financial year.
Sarah still has $42,500 concessional cap available to carry forward to future financial years.
Who may this strategy be useful for?
This strategy may be appropriate for many people including:
Those wishing to maximise their tax deduction in the current and future financial years.
Those who have an unusually high income in the current financial year due to either higher income or capital gains.
Those with a superannuation balance under $500,000 who wish to maximise their superannuation balance prior to retirement.
Those who have not been in the position to maximise contributions in prior years, possibly due to family commitments, time out of the workforce, debt commitments or working outside Australia.
As this strategy has eligibility requirements and may not be suitable for everyone, please don't hesitate to contact us if you would like to explore whether this strategy is appropriate for you.
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