The rules around concessional superannuation contributions are difficult, but for some people, if you end up missing out in one year, you can make up for it in other years, thanks to a relatively recent change in the rules.
The change, which came into effect on 1 July 2018, allows workers to make carry-forward super contributions.
What that means is that if you don’t use all of your concessional cap in a given financial year, you can catch up in subsequent financial years.
Given the current impact of the pandemic on jobs and working arrangements, these rules are particularly important as they allow greater flexibility with your concessional contributions and can help if you have broken work patterns, or if you can’t afford to contribute in a particular year.
As the legislation was introduced in 2018, 2018/19 was the first financial year that you could accrue unused cap amounts. These were able to be used for the first time from 1 July 2019.
Unused cap amounts can be carried forward for up to five years before they expire.
To be eligible to make carry-forward concessional super contributions, your total super balance at the prior 30 June must be under $500,000.
Case study
During 2018–19 to 2021–22, Doug has minimal super contributions as he is working part-time.
His super balance is continuing to grow with earnings and a small amount of super contributions but in 2020–21 his account balance reduced due to negative returns caused by the coronavirus in that year.
Doug has unused cap amounts for each of the 2018–19 to 2021–22 financial years.
Doug’s super contributions cap
|
Caps |
2017–18 |
2018–19 |
2019–20 |
2020–21 |
2021–22 |
|
General contributions cap |
$25,000 |
$25,000 |
$25,000 |
$25,000 |
$25,000 |
|
Cumulative available unused cap |
na |
nil |
$22,000 |
nil |
$69,000 |
|
Maximum cap available |
$25,000 |
$25,000 |
$47,000 |
$25,000 |
$94,000 |
|
Super balance 30 June prior year |
na |
$480,000 |
$490,000 |
$505,000 |
$490,000 |
|
Concessional contributions |
nil |
$3,000 |
$3,000 |
nil |
nil |
|
Available unused cap for relevant financial year to be carried forward |
nil |
$22,000 |
$22,000 |
$25,000 |
$25,000 |
Doug would be entitled to use the unused concessional cap amounts in 2019–20 and 2021–22 as his total super balance at the end of 30 June in the year immediately preceding was less than $500,000.
Doug would not be able to use his unused concessional cap contributions in 2020–21 as his total super balance at the end of 30 June of the previous year was $505,000.
In 2021–22, Doug returns to work. For that year he has a maximum concessional cap amount available of $94,000 ($69,000 plus $25,000) for 2021–22 and is eligible to contribute this amount as his total super balance at the end of 30 June 2021 was now less than $500,000.
Which superannuation rules do you find most confusing?
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Related articles:
https://www.yourlifechoices.com.au/finance/superannuation/continuing-to-make-super-contributions
https://www.yourlifechoices.com.au/finance/superannuation/why-growth-is-vital–even-at-64
https://www.yourlifechoices.com.au/finance/superannuation/super-statement-simplified
