Got less than $500,000 in Super?
Catch up on pre-tax Super contributions from 1 July 2018
You can’t make more than $25,000 in pre-tax or concessional contributions per financial year. But what if you don’t need to contribute that much?
What if you only have $5,000 worth of contributions? What happens to the remaining $20,000?
Previously, this unused contribution cap space simply expired at the end of the financial year.
For people with less than $500,000 in super, this is no longer the case. As of 1 July 2018, unused contribution cap space can be carried forward to be used in future financial years.
HOW COULD THIS HELP YOU?
Consider Mary’s situation. During the current financial year, Mary receives $6,300 of Super guarantee contributions from her employer. She also decides to salary sacrifice $1,000 a month, and so makes $18,300 of concessional contributions for the year. As the concessional contributions cap is $25,000, Mary hasn’t fully used her cap. She could have contributed another $6,700.
In the next financial year, Mary’s base concessional contributions cap is still $25,000. However, to determine her personal cap, the unused amount from the prior year ($6,700) is included. As such, her maximum concessional contribution for the 2020 financial year is $31,700. If Mary makes the same contributions for the 2019/2020 she will be able to make contributions up to $38,400.
This comes in handy, as Mary sold her investment property and has quite a big capital gain. She decides to double her salary sacrifice to $24,000, and her employer contributions remain the same at $6,300. Her total concessional contributions add up to be $30,300, which would have caused her to exceed her cap if she hadn’t been able to carry-forward the prior years unused space.
Unused cap space begins to accrue from the financial year 1 July 2018 to 30 June 2019 and can be carried forward for a maximum of five financial years, after which any unused amounts expire.