Ensuring a secure financial future involves planning for retirement. Many Australians may leave themselves short-handed if they are not taking full advantage of carried forward contributions
In this article, we will discuss what carry forward concessional contributions are, who is eligible, the concessional contribution cap, and an unused concession contributions example. If you wish to get the most out of your retirement, this blog is perfect for you.
What are carry forward concessional contributions?
Carried forward concessional contributions refer to the ability to contribute more to your super fund by utilising any unused concessional contributions from previous years. But what does that mean in simple terms?
Imagine you have a year where you didn’t maximise your concessional contributions to your super fund, which is typically capped at a certain amount. This is valuable to the future you! This means that you can contribute more than your cap, potentially reducing your tax liability meaning that there is more wealth for the future you to enjoy in retirement.
The good news is that the Australian government does allow you to carry forward unused contributions for up to five years, providing an opportunity to make substantial contributions when your financial situation allows. It’s like saving up your financial potential and using it when it benefits you the most.
Who is eligible for carried forward concessional contributions?
To take full advantage of carried forward super contributions, you need to meet eligibility. To be eligible to use carry forward concessional contributions, you must meet the following criteria:
- Super balance less than $500,000: If your total superannuation balance is greater than $500,000, you are not allowed to make carried forward contributions.
- Have unused concessional contributions: To claim carried forward contributions, you need to have unused amounts from up to 5 previous years.
What is the concessional contribution cap?
The concessional contribution cap is the maximum amount you are allowed to contribute to your super fund to receive tax benefits. If you exceed the cap, you may incur additional tax liabilities. The concessional contribution caps are shown below:
- After July 1st, 2021: $27,500
- Between July 1st, 2017, to June 30th, 2021: $25,000
For example, in 2023, you would be able to contribute up to a maximum of $27,500 to your super for the financial year. If you were to contribute more, you would be subject to additional taxes.
Unused concessional contributions example
It may be difficult to interpret carried forward super contributions if you are unaware of how they work. Here, we have provided a visual example so you can better understand the concept.
| Year | Concession cap | Concession contributions (for the year) | Unused concession contributions (carried forward) |
| 2019-20 | $25,000 | $15,000 | $10,000 |
| 2020-21 | $25,000 | $0 | $35,000 |
| 2021-22 | $27,500 | $12,500 | $50,000 |
| 2022-23 | $27,500 | $37,500 | $40,000 |
| 2023-24 | $27,500 | $27,500 | $40,000 |
In the 2022-23 period, we went over the concessional contribution cap but didn’t matter because we still had an additional $50,0000 of carried forward contributions from previous years.
Using the unused concession contributions allows you to go over the concession cap for the year to avoid paying extra taxes.
How does help me increase my super balance?
Money going in to super is taxed at a lower amount if it sits within the concession contribution limits. This means that in the example above, despite contributing $40,000 less than possible, a “catch up” payment can be made at the standard rate of taxation for superfunds and possibly taken as a tax deduction in your personal tax return (check with your tax advisor first!).
This could result in a very positive wealth outcome for you and contribute towards a better retirement in later life.
Retirement planning strategies
Concessional contribution catchups are one of a number of strategies a financial planner can assist you with. Using carry forward concessional contributions to reduce tax liabilities outside of superannuation and increase overall wealth is a simple and positive strategy to ensure you’re on track for the retirement you desire.
Retirement planning encompasses a variety of strategies involved in growing wealth in tax effective environments. The desired and targeted outcome of any retirement strategy is to increase wealth into retirement and importantly to work towards retirement with a goal and active plan in mind.
Forrest Private Wealth – Perth Financial Advisors
If you are having trouble with your superannuation, we are here to help. Forrest Private Wealth is a financial planner in Perth that can make your retirement planning simpler. We work with you to make your short and long-term goals achievable.
We prioritise setting aside time now to better your future. Forrest Private Wealth gets to know you on a personal level to make informed decisions on what options are right for you. Book a virtual coffee today and start your journey to a better future.