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Carry Forward Concessional (tax deductible) Contributions

How to save tax by adding to superannuation

They say there are two certainties in life, death and taxes.  While Muirfield can’t help when the Grim Reaper comes knocking, we might be able to help save you some tax along the journey. 

If you currently pay tax, there may be a benefit in making a personal concessional contribution to superannuation.  For many, this is commonly via salary sacrifice.  Instead of paying tax at your marginal tax rate, which could be as high as 45%, personal concessional contributions are taxed at only 15%.  There is an annual cap of $27,500 for these types of contributions, which also include your employer super payments.

In the 2018-19 financial year, the Government enacted new legislation that allows individuals who have less than $500,000 inside Superannuation to ‘carry forward’ any unused portion of their annual $27,500 Concessional Contribution cap.  The carry forward provision includes unused cap space extending back 5 years from the current financial year.

We often see pre-retirees who have finally paid off their mortgage, trained their kids out of dependency and are now focused on boosting their retirement savings.  Carry-forward contributions can allow you to boost your salary sacrifice above the standard annual cap and claim a healthy income tax-deduction along the way.  Win-Win.

Utilising the carry-forward contribution rules can be beneficial when:

  • You wish to boost your superannuation in the lead-up to retirement.
  • You have realised a large capital gain and wish to make a significant tax-deductible contribution.
  • Your marginal tax rate is above 19% and you wish to reduce your income tax liability.

You should consider you are unable to access your Superannuation until you meet a condition of release.  Potentially a small price to pay for a large tax saving. If you think the Carry-forward provision could benefit you, please contact our office to discuss this strategy in more detail.

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