Tax Planning 2021 – Superannuation “Carry Forward” Deductible Contributions

An effective tax planning tool to be considered prior to June 30 is the Superannuation carry forward of Deductible Contributions. New rules introduced by the Government from July 2018 allow eligible super fund members to use any of their unused deductible contributions limit on a rolling basis for five years.

This means eligible taxpayers may use previously un-used maximum deductible contribution limits from 2019 and 2020 in determining their maximum deductible contributions for 2021. The maximum deductible contribution for the 2019, 2020 and 2021 financials years is $25,000.

If you have a total superannuation balance of less than $500,000 on June 30 of the previous financial year, you may be entitled to contribute more than the $25,000 concessional contribution cap and make additional concessional contributions for unused cap amounts.

It is important to note that the $25,000 concessional contributions cap includes ALL contributions to superannuation (ie Compulsory 9.5% contributions by your employer, Salary Sacrifice amounts and Private Contributions).

EXAMPLE:

Brett received superannuation guarantee contributions from his employer of $6,300 in the 2019 financial year.

Brett received superannuation guarantee contributions from his employer of $7,200 in the 2020 financial year.

Brett’s total superannuation balance at 30 June 2020 is below $500,000.

Brett’s unused concessional contribution cap for 2019 is $18,700 and 2020 is $17,800.

Brett has received superannuation guarantee contributions in 2021 of $8,500.

Brett is able to make additional concessional contributions of $53,000 in the 2021 financial year ($25,000 – $8,500) + ($18,700 + $17,800)

Brett can make the extra concessional contribution in two ways:

1. Salary sacrifice, or
2. A personal concessional contribution for which he can claim a tax deduction in his personal tax return.

Please contact our office if you would like to discuss the rules associated with the “Carry Forward” of Deductible Superannuation Contributions.

 

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