Tax Saving Strategy: Carry forward unused concessional contributions

For small businesses, every dollar and cent saved makes a huge difference to their longevity.

We understand this struggle, and that is why we are putting forward a tax saving strategy for you to consider: carrying forward unused concessional contributions.

What are concessional contributions?

Concessional contributions are contributions made to your superannuation fund before tax. In your super fund, they are taxed at a rate of 15%.

The cap on concessional contributions from 1 July 2017 to 30 June 2021 is $25,000 and from 1 July 2021 onwards, the cap will be $27,500.

How does carrying forward work?

In 2019-20, new carry-forward rules were implemented such that if you did not reach the cap for the concessional contributions in previous years, your cap for subsequent years may be higher.

Using this method, you will be able to carry forward the unused concessional contributions without having to pay extra tax.

How do I carry forward my unused concessional contributions?

To carry forward your unused concessional contributions, you must:

Have a total super balance of less than $500,000 at the end of 30 June of the previous financial year; and
Have made concessional contributions in the financial year that exceed your general concessional contributions cap.

The amount that you can carry forward depends on the amount that you contributed in the previous financial years, starting from 2018-19 onwards.

You can carry forward caps from up to 5 previous financial years. After 5 years, the unused caps will expire and be unusable.

If you still have excess concessional contributions after carrying forward all of your unused caps, you may be charged with additional tax.

Example

Robert received superannuation guarantee contributions of $6,300 during the FY19 and his total superannuation balance was $350,000 as at 30 June 2019.

In the FY20, Robert’s concessional contribution cap is $25,000 plus the unused amount of $18,700 from the FY19 ($25,000 – $6,300 = $18,700). This brings Robert’s total cap to $43,700 for the FY20.

In the FY20, Robert receives $6,300 in super guarantee contributions again. This means Robert is eligible to make additional concessional contributions of $37,400 ($43,700 – $6,300 = $37,400) in the FY20.

Robert can make the extra concessional contribution in two ways:

An additional salary sacrifice; or
A personal concessional contribution for which he can claim a tax deduction in his personal tax return.

Financial Year	Contributions from Robert	Concessional Cap	Carry-Forward Balance
2019	$6,300.00	$25,000.00	$18,700.00
2020	$6,300.00	$25,000.00	$37,400.00

Need help?

Aero Group specialises in accounting, tax and business services. We understand the challenges that businesses have when handling taxes and the importance of making sure your costs are as low as they can be.

To help you achieve your business and personal goals, we have a dedicated team of experts ready to guide you through your tax journey.

If you need any help with your business’ tax planning, please do not hesitate to contact us on our website.