News
Are you maximising your superannuation contributions? With the advent of the unused concessional contributions cap carry forward measure, Australians now possess a golden opportunity to fortify their retirement nest eggs.
So without further ado, let’s dive into to what it all means for you…
The concessional contributions cap signifies the maximum before-tax contributions allowable to your super each year without attracting additional taxes. As of 1 July 2021, this cap sits at $27,500, a step up from the previous financial years' $25,000. This figure escalates in alignment with the Average Weekly Ordinary Time Earnings (AWOTE), and is current for the 2022-23 tax year.
From 1 July 2018, a significant shift was initiated to address the quandaries faced by individuals with fluctuating incomes and to maximise the utility of unused caps for those with lower super balances. This alteration permits individuals with a Total Superannuation Balance (TSB) below $500,000 as of 30th June of the preceding financial year to carry forward any untapped concessional contributions cap from previous years.
Meeting the eligibility criteria empowers you to transport unused concessional cap amounts from up to five preceding financial years, commencing from 2018–19. These surplus amounts can be deployed to augment your contribution caps in forthcoming years, offering a valuable avenue to grow your retirement savings.
Unused cap amounts are automatically deployed upon surpassing the cap in any given year. Nonetheless, it's imperative to bear in mind that these residual cap amounts expire after five years. For instance, any surplus cap amount from 2018–19 would lapse by the conclusion of 2023–24.
Consider James, who has been falling short of his concessional contributions cap over several years, resulting in accrued untapped caps. In the fiscal year 2021-22, James finds himself in a position to make additional contributions. Here's how it unfolds for him:
• In 2020–21, James's TSB surpassed $500,000, rendering him unable to carry forward untapped cap amounts.
• However, in 2021–22, James's TSB dipped below $500,000, rendering him eligible to leverage the untapped cap amounts from preceding years.
By harnessing the carry forward measure, James can inject up to $94,500 into his super in the fiscal year 2021–22, substantially maximising his super contributions and fortifying his retirement.
While capitalising on the benefits of the unused concessional cap carry forward measure is undeniably advantageous, it's imperative to proceed with caution to sidestep potential pitfalls, particularly concerning any excess contributions.
Should you exceed your concessional contributions cap, the excess concessional contributions (ECC) become part of your assessable income. These excess contributions are then subject to taxation at your marginal tax rate, albeit with a 15% tax offset to account for the contributions tax already paid by your super fund. The implications of surpassing your cap extend beyond mere taxation and could impact your PAYG instalments, Medicare levy, Centrelink benefits, and child support obligations.
As we approach a real tax-milestone, we’re dedicated to equipping you with the knowledge and guidance needed to optimise your super contributions. Our approach is always about you, not only helping you maximise your tax position, but also assisting with navigating potential risks with absolute accuracy.
If you're keen on leveraging the unused concessional cap carry forward measure to secure your financial future, or, are looking for strategic advice on how to grow your superannuation for best results and ensure your compliance, reach out to the Attune team today.
You can call us anytime on 1300 866 113 or send us an email to start the conversation – let's collaborate to safeguard your retirement aspirations.
