Catch Up Carry-forward Concessional Contributions #UnusedSuperContributions - YouTube

Most people once they get to the age of 50 or 60  start thinking:

"Do I have enough money saved for my retirement?" "Is it too late to save enough?"

And you might have a reason to worry, because superannuation in Australia, which is our best form of saving for retirement,

is filled with rules, regulations, and contribution limits.

But I might have some great news for you today. I would like to explain a little known contribution opportunity,

that might help you: No. 1 - Catch up on all those lost years of not contributing enough,

No. 2 - Grow your super and ultimately retire better and,

No. 3 - Get tax benefits in the form of tax deduction for your contributions.

If we haven't met before, my name is Katherine from About Retirement.

I'm a Certified Financial Planner and I have been helping my clients for over 20 years.  with creative strategies to improve their savings, super,

to create great investment portfolios,  which ultimately provide secure retirement with great level of income for life.

And today I really would like to help you as well.

So today we are talking about the requested topic: Carry Forward Super Contributions otherwise known as

Superannuation Catch-up Concessional Contributions and I will cover:   

No. 1 - What are Carry Forward Contributions?

No. 2 -  Who can benefit from Carry Forward Contributions?

No. 3 - What are eligibility rules?

No. 4 - Some case studies for you and,

No. 5 - Four steps to do it right.

But first let's review very quickly, what Concessional Contributions actually are.

Those are your deductible contributions, so contributions for which someone claims tax deductions,

when money is being contributed to superannuation.

And that includes superannuation guarantee contributions or SGC,

which are your employer contributions and obviously that's your  employer who is eligible for tax deduction. 

Your salary sacrifice contributions.

If you are self-employed,

all your self-employed contributions for which you wish to claim tax deduction,

or even right now a private person, you don't have to be self-employed anymore,

but a private person can contribute to super and still claim tax deduction.

But we all need to play by the rules.

The annual limit of this type of contribution is $25,000.

Well, I'm assuming that you have checked that you are actually eligible to contribute to super in the first place.

If unsure, have a look at this video. If you need to get familiar with superannuation contribution rules including SG Contribution have a look at this video.

If you would like to understand benefits of Salary Sacrifice, here is another video for you.

And now, let's dive into this. What are Carry Forward Contributions?

Carry Forward Contributions, so-called Catch-up Contributions,  or as the proper industry naming is:  

Carry Forward Unused Concessional Contributions,

are not any special type of contributions really.

They are often overlooked contribution opportunity,  allowing you to contribute to your superannuation fund

the amount of Concessional Contributions that  you have not used in your previous years.

You can only contribute up to Concessional Contribution limit and up to five years.

After five years any unused amount expires.

But it all started in a financial year 2018-19. This means that the first year you were able to make

additional Concessional Contributions by applying any unused Concessional Contribution Cap was in 2019/20.

So bottom line what that means is that, if for example in 2018-19 financial year only $10,000 was contributed

to your super fund as a Concessional Contribution, and as we know the limit is $25,000

you actually have $15,000 remaining from that year as Unused Concessional Contribution,

that you could carry forward, and use it to increase your Concessional Cap until 2023-24 financial year.

So who can benefit from Carry Forward Contributions?

Well virtually anyone can benefit from those types of contributions but,

it's especially beneficial for self-employed people,

where your income can vary from year to year or

any person whose income varies due to

commissions, bonuses or part-time employment.

It is also a great way to contribute extra to your super at later stage in your life,

when kids are of your hands you have mortgage paid off

and you have a little bit extra of disposable income.

So what are the eligibility rules? Well...

No 1 - You have to be eligible to contribute to super in the first place.

No. 2 - As we said before, annual limit is $25,000 per financial year.

No. 3 - Your Total Superannuation Balance must be under $500,000

at 30 of June in a previous financial year.

So, if you are thinking to make a Carry Forward Concessional Contribution in 2020/21,

your Total Superannuation Balance must have been under $500,000 on 30 of June 2020.

And don't forget that, your Total Super Balance is the superannuation balance of all your super funds and that includes:  

your accumulation phase and your retirement phase as well as

any rollovers in transit between super funds on 30th of June.

Also it is important to remember that, if your total super balance falls below $500,000

at the later date for example due to market fall,

you are once again eligible to apply any of your

unused Concessional Contribution Cap in future financial years.

The $500,000 total superannuation balance is not subject to indexation.

It is really designed for people who had no time  or sufficient funds to grow their super fund to reasonable limits.

So let's have a look at some case studies now.

My client Patricia took time off work in 2019-20 to complete her study. Her super fund balance on 30 of June 2020 was $150,000.

Following year 2021, when she returned to work, she was able to contribute $50,000 to superannuation  

as Concessional Contribution, so those contribution  before tax for which you can claim tax deduction.

So that's $25,000 for 2020/21and Carry Forward Unused Concessional Contribution

and another $25,000 for financial year 2019-20, when she was not working.

So now let's have a look at Tom. Tom is 50 years of age with annual salary of $120,000 and super balance of $180,000 on 30th of June 2020.

This is the very first time when he is on such a high salary and  he is quite aware of poor superannuation balance. 

We checked with his super fund. All Concessional Contributions made in prior years:  

In 2018-19 there was $5,000 contributed as Concessional Contribution.

As we know, the limit for the financial year is $25,000, less $5,000 contributed,

it leaves $20,000 of Unused Concessional Contribution for that particular financial year.

In 2019-20 there was $10,000 contributed as Concessional Contribution. We have $15,000 remaining as Unused Concessional Contribution.

So in 2020/21 he could contribute up to $60,000 of Concessional Contribution. 

That constitutes of $25,000 for 2020/21, $20,000 for  2018/19 and $15,000 for financial year 2019/20.  

Altogether $60K. The entire $60,000 is Concessional  Contribution for which he can claim tax deduction,  

but don't forget that, that contribution will be  taxed at 15% on entry to superannuation fund.

And now let's have a look at Ruby. She is planning to use some of her Unused Concessional Contribution Cap amount

to make a Concessional Contribution on the top of her employer SG contribution of $5,000 per annum.

So let's assume that on 30th of June 2021 Ruby's Total Super Balance is $200,000.

Ruby's Unused Concessional Contributions amounts from previous financial years are as follows:

in a year 2018/19 we know the cap was $25,000  

$5,000 was contributed by employer, leaves $20,000 of Unused Concessional Contribution available.

The same applies for the financial year 2019/20, 2020/21, 2021/22 assuming that employer will contribute the same $5,000.

So the total amount Ruby could contribute as a Concessional in 2021/22 is $80,000 after excluding employer contributions of $5,000 for that financial year.

Now Ruby decides to contribute $50,000. She is eligible to claim tax deduction for the full  contribution amount,

and her super contribution will be taxed at 15% on entry to superannuation fund.

As Ruby hasn't used up the full amount of  Unused Concessional Contributions there will be  

$30,000 still remaining as Unused Concessional Contribution for following years.

This is because Catch-up Contributions work from the earliest year to the most recent year.

So by contributing $50,000 Ruby is left with Unused Concessional Contribution of:

$10,000 for 2020/21

and further $20,000 for for the financial year 2021/22.

So now let's have a look at those four steps to calculating your carry forward amount.

No. 1 - Contact every single superannuation fund if you have many.

Don't forget the pension is also included.

to find out your Total Superannuation Balance.

Step No. 2 - Ensure that your Total Super Balance is under $500,000.

No. 3 - Check your Concessional Contributions for previous years and compare with the Contribution Cap applied for that particular year.

No. 4 - Work out the amount you have available to carry  forward from Unused Concessional Cap.

Some super funds will actually list that information on your contribution statement.

As with anything related to superannuation the rules are complex, there are a lot of conditions that you need to apply because

this is a concessionally tax environment and it  is governed by Australia's Superannuation Law  

But there is a great deal of benefit to this strategy:

No. 1 - You can utilize otherwise unapplied Unused Concessional Contribution Caps

No. 2 - You have ability to increase amounts held in your superannuation.

No. 3 - It is potential to increase tax deduction for your personal contributions beyond the standard $25,000 cap and

No. 4 - You have ability to move deduction for personal  contribution to later financial years, which may actually suit you.

It might be better timing because for example, you expect a higher taxable income or you might be subject to capital gains tax.

This is a fantastic tax strategy in a year when you dispose of some major asset such as for example investment property or bunch of shares.

The extra Unused Concessional Contributions can work  wonders for reducing your personal tax liability, 

your Capital Gains Tax when you are preparing your Income Tax Return.

Please make sure that you triple check your personal contribution limit for the year and you will understand super contribution caps,

and not contribute above the allowable limit to superannuation fund,

as you will find yourself in a little bit of debacle of access contributions,  for which you will be fined a penalty.

If you found this video of value, please LIKE it and SUBSCRIBE to my channel to be notified of my new videos.

If you have any questions or comment feel free to leave them below my video.

Superannuation is a very big and complex topic. So to make sure you are doing everything correctly,

view this series of videos explaining all you need to know about super.

The second video is: "How to choose the most suitable superannuation for you".

Thank you again for joining me and I hope to see you here soon.