Reading time: 1 minute
Superannuation rules and jargon can be confusing at the best of times. Some even involve time travel, like the bring-forward and carry-forward rules.
But don’t let the mind-bending jargon put you off because understanding these rules can help build your super balance, reduce tax and avoid any breaches of contribution caps along the way.
The bring-forward rule deals with non-concessional (after-tax) contributions. It allows you to bring forward future non-concessional contribution caps in a shorter time period.
From 1 July 2021, the annual non-concessional contributions cap is $110,000, up from $100,000 previously. However, if you meet all the eligibility criteria, the bring-forward rules allow you to make non-concessional contributions of up to three times the annual general contributions cap in a single year (3 x $110,000 = $330,000 in 2021-22).
The carry-forward rule deals with concessional (before-tax) contributions. It allows you to use any of your previously unused concessional contributions cap on a rolling basis for five years.
So, if you don’t utilise your full concessional contributions cap ($27,500 in 2021-22), you can carry forward the unused amount and take advantage of it up to five years later. (Prior to 30 June 2021, the annual general concessional contributions cap was $25,000.)
Based on the above, Shirley can contribute $31,500 as a concessional contribution into her super fund using the carry-forward rule. If her tax situation permits, she can even claim a personal tax deduction on the $31,500.
By also triggering the bring-forward rule and making a non-concessional contribution of $330,000, Shirley can increase her super balance to $811,500 ($450,000 + $330,000 + $31,500).