The carry-forward concessional contribution provision allows you to utilise the unused concessional contributions from previous financial years in the current financial year.
Advantages of making a carry-forward concessional contribution:
- You do not lose the unused contributions from prior financial years if you do not have sufficient funds or taxable income to make the contribution.
- The contribution is taxed at 15%, instead of being taxed at your marginal tax rate.
- The funds contributed will be invested in line with your current investment approach.
- Earnings that accrue on these funds are taxed at a maximum of 15% in the fund. This is likely to be less than your marginal tax rate.
Limitations of making a carry-forward concessional contribution:
- Only unused concessional contributions after and including the 2018/2019 financial year can be accrued and used in subsequent years. Unused contributions can be carried forward for up to five years.
- You can only make a carry-forward concessional contribution if your total superannuation balance was less than $500,000 on 30 June of the previous financial year.
- You will not be able to access your contributed funds until you meet a condition of release.
- If you exceed your unused cap, the excess is effectively taxed at your marginal tax rate plus an additional tax penalty. If you don’t withdraw the excess amount then these are counted towards your non-concessional contribution limit.