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If you feel like you’ve missed the boat when it comes to building your retirement savings, it could be time to use an often-overlooked contribution opportunity.
Making a carry-forward contribution can be an easy way to boost the balance of your super account, but it’s one many people ignore.
So, what is a carry-forward contribution and are you eligible to make one?
What are carry-forward contributions?
Carry-forward contributions are not a special type of super contribution; they simply apply rules allowing super fund members to use any of their unused concessional contributions cap (or limit) on a rolling basis for five years.
This means if you don’t use the full amount of your concessional contribution cap ($25,000 in 2019/20 and 2020/21), you can carry forward the unused amount and take advantage of it up to five years later. After five years, any unused amounts expire.
Expiry of unused concessional contributions caps
| Financial year of unused concessional contributions cap | Last financial year in which unused cap can be used |
|---|---|
| 2018/19 | 2023/24 |
| 2019/20 | 2024/25 |
| 2020/21 | 2025/26 |
| 2021/22 | 2026/27 |
| 2022/23 | 2027/28 |
| 2023/24 | 2028/29 |
Learn more about concessional super contributions.
Good to know
Carry-forward contributions were originally called catch-up contributions when first announced in the 2016 Federal Budget. They are now generally referred to as carry-forward concessional contributions.
The rules permitting you to make carry-forward concessional contributions have nothing to do with the bring-forward rules, which allow you to make larger non-concessional (after-tax) contributions into your super account over a three-year period.
Who can benefit from carry-forward contributions?
Carry-forward contributions were introduced to make it easier for people with interrupted or non-standard work patterns to save for their retirement and to benefit from the tax concessions available in the super system.
Annual concessional contribution caps make it difficult to build retirement savings for people who take time out from work, work part time, or have ‘lumpy’ income and periods when they make no or limited super contributions. This includes women who work part time or take time off to care for children or other family members and people who have time out of the workforce for caring responsibilities, further studies, or due to physical or mental illness.
Carry-forward contributions can also be made by people who find they have more disposable income later in life due to reduced household costs, such as mortgage repayments or school fees.
Need to know
The first financial year in which you could access your unused concessional contributions cap was 2019/20.
Only unused concessional contribution cap amounts from 1 July 2018 onwards can be carried forward.
What are the eligibility rules?
To make a carry-forward contribution, your Total Super Balance (TSB) must be under $500,000 at 30 June in the previous financial year. For example, if you want to make a carry-forward concessional contribution in 2020/21, your TSB must have been under $500,000 on 30 June 2020.
Your TSB is calculated by adding together all the amounts you have in the accumulation phase of super, plus the retirement phase value of your super and any rollovers in transit between super funds at 30 June.
If your TSB falls below $500,000 at a later date, you are once again eligible to apply any of your unused concessional contributions cap in a future financial year.
For more information, see SuperGuide article What is included in my Total Superannuation Balance, and when does it apply?.
Need to know
The amounts of your unused contributions cap are applied in order from the earliest financial year to the most recent financial year.
How carry-forward contributions work: 3 case studies
Case study 1
Sylvia has a $200,000 balance in her super account. During 2019/20 she took time off work to care for her son, so Sylvia didn’t make any concessional contributions into her super account.
This means in the following financial year (2020/21), she can contribute $50,000 in concessional (before-tax) contributions into her super account.
The $50,000 consists of her normal $25,000 annual concessional contribution cap for 2020/21, plus $25,000 from her unused 2019/20 concessional contribution cap that she carried forward.
Case study 2
Leyton is aged 46 and his current annual salary is $100,000. The balance in his super account is $400,000.
In 2019/20, the total concessional contribution made into his super account was $10,000.
This means in 2020/21 Leyton is able to contribute $40,000 in concessional contributions into his super account. The $40,000 consists of his normal annual $25,000 concessional contribution cap for 2020/21 and $15,000, which is the unused concessional contribution amount from 2019/20 carried forward ($25,000 – $10,000 = $15,000).
The entire $40,000 in concessional contributions will be taxed at 15% in Leyton’s super fund.
Case study 3
In 2021/22, Kylie plans to use some of her unused concessional contributions cap amounts to make a concessional contribution on top of her part-time employer’s concessional SG contribution of $5,000.
On 30 June 2021 Kylie’s Total Super Balance is $180,000. She has unused concessional contribution cap amounts from the previous three financial years, so she is eligible to make a carry-forward concessional contribution in 2021/22 of up to $60,000.
| 2018/19 | 2019/20 | 2020/21 | 2021/22 | |
|---|---|---|---|---|
| Annual contributions cap | $25,000 | $25,000 | $25,000 | $25,000 |
| Concessional contributions into Kylie’s account | $5,000 | $5,000 | $5,000 | $50,000 |
| Available unused concessional cap | $20,000 | $20,000 | $20,000 | nil |
| Cumulative available unused concessional cap | $20,000 | $40,000 | $60,000 | $35,000 |
Kylie decides to make a concessional contribution of $50,000 in 2021/22, which would exceed her normal concessional cap by $25,000. However, Kylie is able to use the full amount of her unused contribution cap from 2018/19 ($20,000) plus $5,000 of her unused contribution cap from 2019/20, giving her the extra $25,000 contribution cap.
(The amounts of Kylie’s unused contributions cap are applied in order from the earliest financial year to the most recent financial year.) The remaining $35,000 in unused concessional contributions cap from 2019/20 and 2020/21 rolls forward and can be used in future years.
5 steps to calculating your carry-forward amount
- Contact your super fund (or funds if you have several super accounts) for a current valuation of all your super accounts to work out your Total Superannuation Balance (TSB).
- Check the last reported balance for all your super accounts with the ATO. This information is available online via the government’s MyGov
- Ensure your TSB is under $500,000.
- Check your concessional contributions for previous years and compare this with the contribution cap applying that year.
- Work out the amount you have available to carry forward from your unused concessional cap. (Some super funds list this information on your annual contribution statement.)
Need to know
It’s important to keep track of how much you have made in concessional contributions each year. If you contribute more than you are allowed under the rules, the excess amounts will be taxed at your marginal (or top) tax rate.
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