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Bring-forward vs carry-forward contributions: What’s the difference?

Bring-forward vs carry-forward contributions: What’s the difference?

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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).

Read through our guide to the bring-forward rule to check the bring-forward eligibility criteria.

Case study 1

Shirley is 62 and plans to fully retire once she turns 63.

Shirley’s mother unfortunately passes away leaving her an inheritance of $400,000 in cash. Shirley wants to transfer as much of these funds into her super account as possible to boost her retirement savings before she turns 63 and retires.

Shirley’s super balance as at 30 June 2021 was $450,000. She is advised that the quickest and simplest way to boost her super is by triggering the bring-forward rule and contributing $330,000 from her mother’s inheritance into her own super account. This means her super balance will increase to $780,000.

Shirley won’t be able to make to any more non-concessional contributions in 2022-23 and 2023/24. After that, if she meets all the criteria, she may be able to make further non-concessional contributions up to the annual non-concessional contribution cap.

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.)

Read through our guide to carry-forward contributions to check the eligibility criteria for using catch-up contributions.

Case study 2

Following on from the above case study, if Shirley wants to give her retirement savings a further boost, she could consider using the carry-forward rule along with the bring-forward rule.

As Shirley’s total super balance (TSB) was below $500,000 on 30 June 2021, she can use any unused concessional cap amounts from 2018-19 up to 2021-22. Shirley’s concessional contributions history is as follows:

Year General concessional contribution cap Concessional contributions in Shirley’s super Unused cap Cumulative unused cap
2018-19 $25,000 $15,000 $10,000 $10,000
2019-20 $25,000 $17,000 $8,000 $18,000
2020-21 $25,000 $19,000 $6,000 $24,000
2021-22 $27,500 $20,000 $7,500 $31,500

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).

About the author

Aakash Mehta

Aakash Mehta is a financial adviser and has been working in the financial planning profession for more than 7 years. He has an undergraduate degree in commerce, a post-graduate degree in international finance and a diploma in financial planning. His day-to-day work exposes him to real life financial planning issues around superannuation, retirement, insurance and estate planning, and he contributes to SuperGuide by writing case studies and articles on various financial planning strategies.

Learn more about super contributions strategies in the following guides:

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Comments

  1. Luke He says

    Can you please confirm – with bring forward rule, let’s say Shirley contributes $330,000.00, will she get taxed on $330,000.00 at 15%? If not, when she accesses the super benefits, will she get taxed on super withdrawals?

    • SuperGuide says

      Hi Luke – We’re sorry for the delay in responding.

      The bring-forward amount of $330,000 is a non-concessional contribution. They are different from carry-forward contributions which are considered to be concessional contributions. Non-concessional contributions are contributed into super with after tax dollars. Therefore, they are not taxed on their way into super.
      Once inside super, any earnings or capital gains may be taxed depending on whether the super is in accumulation or transition to retirement phase.

      However, if someone has met a full condition of release, for example turning age 65 and has commenced an account-based pension, any earning, capital gains and withdrawals from super will be tax free.

      Please refer to the following articles for more general information:

      Please note, the above response is general information only and you should consult a qualified professional to help with your specific situation.

      Best wishes, The SuperGuide team

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