The approach to the end of the financial year is a great time to review your superannuation strategy – especially if you haven’t used up your concessional (pre-tax) contribution caps in recent years.
Thanks to the ATO’s carry-forward contributions rule, you may be able to boost your super and gain a tax advantage by topping up before 30 June.
But like all tax strategies, it comes with a few considerations to keep in mind.
What Are Carry-Forward Contributions?
The carry-forward rule allows you to make extra concessional super contributions by using up unused cap space from the previous five financial years. This means if you didn’t max out your annual concessional cap in earlier years, you might be able to contribute more than that cap this year without paying extra tax.
What Are Concessional Contributions?
Concessional contributions are before-tax contributions made to your super fund. These include employer contributions (like the Super Guarantee), salary sacrifice amounts, and personal contributions you claim as a tax deduction.
The annual concessional contributions cap is currently $30,000 (as of 2024–25). Going over this cap can lead to extra tax, so knowing your limits is essential.
To be eligible, your total super balance as of 30 June of the previous financial year must have been under $500,000.
The rule is especially useful for people who’ve had irregular income or taken career breaks – think small business owners, part-time workers, or parents returning to work. Now you can catch up – within limits – and potentially reduce your taxable income in the process.
An Example
Let’s say you only contributed $10,000 in concessional contributions in 2021–22. That leaves $17,500 of unused cap from that year. If you didn’t use it in the years since, and you’re eligible this year, you could “catch up” by making extra contributions on top of your usual cap – possibly contributing significantly more than $30,000 this year, all at concessional tax rates.
Why Do It Before 30 June?
EOFY is your cut-off to use any unused caps from 2019-20 – they’ll expire if not used this year. This makes it essential to act before 30 June to take advantage of older unused amounts. After that, only unused amounts from 2020–21 onward will remain available.
What to Keep in Mind
- Contribution Timing: Make sure your contribution hits your super fund’s account before 30 June. Transfers can take time, so don’t leave it to the last few days.
- Know Your Numbers: Before contributing, check how much unused cap you have and confirm your total super balance is under $500,000 at 30 June of the previous year.
- Avoid Excess Contributions Tax: If you overstep the cap (including carried-forward amounts), the excess may be taxed at your marginal rate. Accurate calculations are key.
- Claiming a Tax Deduction: If you’re making a personal concessional contribution, don’t forget to lodge a “Notice of Intent to Claim” with your fund before you lodge your tax return.
Get Advice: Super strategies are powerful but complex. What works for one person may not suit another, especially when factoring in age, income, and retirement goals.
Have questions about your contribution history or strategy? We’re here to help.
If you’re considering boosting your super before 30 June, now’s the time to check your position. Let’s sit down and review your contributions, unused caps, and eligibility so you can make the most of this opportunity, without any last-minute stress.
