Have you maximised your concessional super contributions for 2019? Act now to take advantage of the new rules allowing you to make a top-up payment. Get in touch today before your super fund contribution deadline for 2020.
If your superannuation fund balance is less than $500,000, a new rule means you are now able to carry forward any unused concessional contribution from prior years into following years. This allows you to maximise the tax benefits of contributing the upper limit concessional amount.
It also gives you some flexibility with being able to contribute more in years that you have the cash flow to do so. This is useful for people whose income has been interrupted or for those who receive larger than usual income some years.
Once your fund balance reaches $500,000 you won’t be able to carry forward unused amounts. Also, unused balances can only be carried forward for up to five years.
The new rule applies from 1 July 2018. This means that the 2020 financial year is the first year in which you can top-up your super contributions by the carry forward amount. This year, there is only one year (2019) of unused cap that can be carried forward. In 2021, there will be two years of unused balance available to carry forward and so on, up to a maximum of five years balance to carry forward in the 2024 financial year. Assuming the law doesn’t change, the five-year expiry rule will continue from then.
What are Concessional Contributions?
Concessional superannuation contributions are those made to your super fund before tax. This includes compulsory employer superannuation guarantee contributions, additional employer before-tax super and salary sacrifice amounts.
It may also include personal contributions you make as tax deductions, for example, sole traders who contribute to their own super fund.
Roll Over Unused Concessional Balance Example
If you contributed $15,000 in the 2019 financial year, and your fund balance is less than $500,000, you can contribute an extra $10,000 in the 2020 financial year, above the usual $25,000 concessional cap, bringing the total for 2020 to $35,000.
As another example, let’s say as a self-employed person you did not contribute any superannuation for 2019 to 2023. In the 2024 financial year, you could then contribute $125,000 to catch up to the allowable concessional contribution cap for the previous five years.
Concessional Contributions Checklist
If you contribute too much to your super fund you may end up with a tax bill! If you’re keen to get the tax benefits of maximum contributions, talk to us now before your super fund deadline and we’ll help you build your super balance. We can also help you start planning for the following year’s contributions.
We are here to help, contact us today:
Brew Accounting Pty Ltd
Phone 0405 027 250 | Web brewaccounting.com.au
Suite 7/104 Crown St, Wollongong NSW 2500
Content originally published by BOMA. We have updated some of this article for our readers