A recent positive change to superannuation has been the ability to carry forward unused contributions to use in later years. Superannuation carry forward contributions can be a confusing topic for many people. However, understanding what it means and how it works is crucial for maximizing your retirement savings. In this explanation, I will simplify the concept of superannuation carry forward contributions, so you can make informed decisions about your financial future.
Explanation:
Superannuation carry forward contributions refer to the ability to carry forward any unused concessional contribution cap amounts from previous years to future years. This means that if you have not utilized your concessional contribution cap in a particular financial year, you can carry forward that unused amount for up to five years.
Concessional contributions include employer contributions, salary sacrifice contributions, and personal contributions claimed as a tax deduction. The current concessional contribution cap is $27,500 per annum.
For example, let’s say you only contributed $20,000 in concessional contributions in the 2021-2022 financial year. This means you still have $7,500 left in your concessional contribution cap for that year. You can carry forward this unused amount to future years, up to a maximum of five years. This means that in the 2022-2023 financial year, you can make a concessional contribution of up to $35,000 ($27,500 cap + $7,500 carry forward amount).
It’s important to note that superannuation carry forward contributions are only available to individuals with a total superannuation balance of less than $500,000 at the end of the previous financial year.
In summary, superannuation carry forward contributions can be a valuable tool for maximizing your retirement savings. They are also a valuable tool we use when undertaking tax planning for our clients. By carrying forward any unused concessional contribution cap amounts, you can make larger contributions to your super in future years. It’s important to understand the eligibility criteria and the rules surrounding carry forward contributions to make the most of this opportunity. If you have any questions or concerns, it’s best to consult a financial advisor or tax professional.
Need to know more? Then book in a meeting with us at Infuse ASAP.