There is an exciting opportunity for eligible Australians starting this financial year. It is the ability to bring forward unused concessional contribution caps from prior years if your individual members balance is under $500,000. Whilst the existing concessional cap of $25,000 has not changed, this new measure will effectively allow you to contribute over the cap in a given financial year as long as you had unused cap in prior years (starting from the just closed financial year 2018-19).
Here is an example to show you how it works.
In the 2018-19 financial year, Julie’s (member balance under $500,000) combined SGC (Superannuation Guarantee Contribution) & salary sacrifice contributions added up to $15,000. $25,000 was the cap during that year so Julie has an unused portion of $10,000 that she can carry forward to this current financial year (2019-20). Therefore, in this current financial year (2019-20), if Julie has capacity to contribute more into Superannuation, she will be able to contribute up to $35,000 into Superannuation.
Whilst the new rules will allow you to use up to 5 years of unused concessional contribution caps, you can only start counting your unused years from the just closed 2018-19 financial year. This rule will become progressively advantageous for people that want to get money into Superannuation, either closer to retirement or if they have a large capital gain event, they want to offset with a tax-deductible contribution.
The issue that many Australian’s face is that they are unable to get enough money in Superannuation as they get closer to retirement. This is a positive change that has broken the recent run of reductions in caps. In our humble opinion however, this measure may not last forever. The ALP was to repeal this change if they were successful in the last federal election. Therefore, if you want to take advantage of this, you should speak to your financial adviser about it soon and make some plans. This change has the possibility to save you thousands in personal tax and also allow you to get the right amount into Super for a comfortable retirement.
More Details- Future Scenario’s
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If your SMSF is with Supervision, your current contribution limits are available online and considers your new limits (Cumulative Available Unused Cap). If you are in any doubt about the limits or the amounts that are presented online, please call our office to discuss. Please note that the online figures can only cover what is going on inside your SMSF and does not cover any Superannuation accounts that you hold outside of your SMSF.
We know there is a lot of jargon in this article, so please find a glossary below if you need.
Concessional Contributions: The money that either you or your employer put into Superannuation and claim a tax deduction for. These contributions are taxed in your Superannuation account @ 15%.
Concessional Contribution Cap: The amount of money that you can contribute in one financial year without paying excess contribution tax. The current cap is $25,000.
SGC (Superannuation Guarantee Contribution): The amount that your employer puts into your Superannuation account on your behalf. The amount is calculated on a set percentage of your salary & wages.
Cumulative Available Unused Cap: The amount that is available from previous years concessional caps that you haven’t used. This amount will include up to 5 previous years starting from 2018-19 financial year. This amount is on your online SMSF contribution members page in “MY PORTFOLIO” in Super Gateway.