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How much in concessional super contributions can you carry forward?

Jodie Humphries avatar
Jodie Humphries
- 4 min read
How much in concessional super contributions can you carry forward?

While most full-time employees in Australia receive super guarantee contributions from their employees, they can contribute more to super through, for instance, setting up a salary sacrifice arrangement if their employer allows it. These contributions are deducted from the employee’s pre-tax wages, bringing down their taxable income in the process. Further, the tax rate applicable on these contributions is typically less than the marginal tax rate, which is why they are also called concessional contributions. 

Under the rules outlined by the Australian Taxation Office (ATO), if you make concessional contributions exceeding a defined cap or upper limit, you have to pay tax at your marginal rate. While the annual cap on concessional contributions is $27,500, you may contribute more if you did not exceed the cap in any of the past five years. However, if your super fund balance was more than $500,000 at the end of the last financial year, you cannot carry forward your unused concessional contributions cap.

How do you calculate the unused concessional contributions you can carry forward?

ATO rules stipulate that you can catch up with or carry forward your unused concessional contributions cap from the financial year 2018-2019 onwards if you have made excessive contributions in the current financial year. Note that the cap on concessional super contributions was increased to $27,500 from 1 July 2021. Between 1 July 2017 to 30 June 2021, the concessional super contribution cap was $25,000. 

Suppose your concessional contributions amounted to $25,000 in 2018-2019 and 2019-2020, and $15,000 in 2020-2021. You can contribute $10,000 more as a carry-forward concessional contribution in 2021-2022, but you must first contribute the maximum of $27,500 available as your cap for this financial year.

However, suppose your super fund balance was $490,000 on 30 June 2020. Adding the $15,000 you contributed in 2020-2021, your super fund balance would have exceeded $500,000 on 30 June 2021. In this situation, you won’t be able to carry forward the $10,000 of unused concessional contributions cap from 2020-2021, but you can still contribute up to the allowed current year cap of $27,500. Consider checking your super fund balance, past year concessional contributions, and the current cap available to you through your MyGov account.

How are carry forward concessional contributions taxed?

Your super fund is required to pay a contributions tax of 15 per cent on your concessional contributions that do not exceed the total cap available to you. If you contribute more than the cap available to you, the excess contribution becomes part of your assessable income taxed at the marginal rate. However, the tax payable on the excess contribution is adjusted to account for the 15 per cent tax levied by your super fund. Note that you can pay the tax due by releasing as much as 85 per cent of the excess contribution. Also, starting from the financial year 2021-2022, you no longer need to pay the excess concessional contributions charge levied in earlier years. 

However, if you do not release the excess contribution, it will be counted as a non-concessional super contribution, similar to a super contribution from your after-tax income. The tax payable on such contributions is usually at a much higher rate of up to 94 per cent, depending on whether you pay the tax using the excess contributions. Remember that if you exceed the cap for either concessional contributions or non-concessional contributions, you will receive a determination from the ATO that explains the options available to you. You can also choose to request the ATO Commissioner to exercise their discretion in exceptional circumstances and allow you to make excess concessional or non-concessional contributions.

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Product database updated 21 May, 2024

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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