Reading time: 2 minutes
On this page
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 opportunity to put a little extra into your super.
Making a carry-forward contribution can be an easy way to boost the balance of your super account if you have cash to spare.
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 allow super fund members to use any of their previously 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 contributions cap ($27,500 in 2021–22), you can carry forward the unused amount and take advantage of it up to five years later. (From 1 July 2017 to 30 June 2021, the annual general concessional contributions cap was $25,000.)
Expiry of unused concessional contributions caps
After five years, any of your unused concessional contributions cap amounts will expire.
|Financial year of unused concessional contributions cap||Last financial year in which unused cap can be used|
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.
Making additional concessional contributions can be a tax-effective way to grow your retirement savings, as these before-tax contributions are only taxed at 15% as they enter your super account, rather than at your marginal tax rate (which can be up to a maximum of 47% including the Medicare levy). Any earnings you receive on your contributions once they are in your super account are also taxed at only 15%.
What are the eligibility rules?
There are two conditions to meet before you can use your unused concessional cap amounts:
- 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 2021–22, your TSB must have been under $500,000 on 30 June 2021.
- 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.
- You have made concessional contributions in the financial year exceeding the annual general concessional contributions cap ($27,500 in 2021–22)
How carry-forward contributions work: 3 case studies
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 website.
- 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.)