The 2019/20 financial year is the first financial year in which you are able to use any unused concessional contributions cap from a previous year; known as the ‘carry forward rule’, so you could super boost your super balance this year.
This extra contribution into your super gives you the potential to save more tax and have all the benefits of compounding earnings and interest over the lifetime of these additional funds in your super.
You need to check a couple of things before putting any extra contributions in.
- To be eligible for the carry forward rule, your super balance needs to be less than $500,000 at the end of the 18/19 financial year.
- Your concessional contributions (before-tax) usually consist of your employer’s SG contributions, salary sacrifice amount and any personal contributions for which you plan to claim a tax deduction. You can contribute a max of $25,000 per year. If last financial year you didn’t contribute the full $25,000, you can now contribute the ‘left over’ amount available.
- Your non-concessional contributions (after-tax), these are usually additional contributions or lumpsum contributions. You can contribute a max of $100,000 per year. If last financial year you didn’t contribute the full $100,000, you can now contribute the ‘left over’ amount.
During 2018–19, Jordan had minimal super contributions as he had been working part-time while completing studies. Jordan is now working full-time, so has had regular super contributions for this financial year so far.
Jordan would be entitled to use the unused concessional cap amount from 2018-19 as the total super balance at the end of 30 June, 2019 was less than the $500,000.
Jordan’s estimated total concessional contributions will be $11,500 this year, so Jordan could boost his super by adding up to an extra $35,000 this year.
However, if Jordan could only add an extra $10,000 this year, the remaining $25,000 ($35,000 – $10,000) unused cap will be available again next year.
The extra you put in could be a one-off personal tax-deductible contribution or salary sacrifice.
If you are doing a one off contribution and want to maximise your contributions, it is a good idea to confirm with your employer when they make your contribution payment to your super fund, so you know whether or not it will hit your super account by 30 June.
Important Covid-19 Note: Employers are not required to make their SG contributions for the April to June quarter until 28 July 2020, which is in the next financial year. Many employers will be struggling to make cashflow and employment payments due to the COVID-19 lockdown, so they may not make their SG contributions as promptly as normal.