The maximum annual tax-deductible contribution you can make to your superannuation fund is $27,500.
However, you may also be eligible for “carry forward unused contributions”.
What do the maximum annual tax-deductible contributions include?
It is important to note that the limit of $27,500 includes all the following contributions:
- Employer super guarantee,
- Salary sacrifice contributions and
- Personal tax-deductible contributions.
Note, if you are on a salary of, say, $150,000 and your employer has made the statutory employer superannuation guarantee of $16,500, then you are only eligible to make an additional personal tax-deductible contribution of the difference of $11,000.
What are ‘carried forward unused contributions?
If your superannuation balance is less than $500,000 and you have not maximised your concessional, tax-deductible contributions over the past five years, you may be eligible to make additional tax-deductible contributions to your superannuation fund, in addition to the $27,500 mentioned above.
Example 1:
If you were a non-working mum at any time during the last five years and have now returned to the workforce, and your superannuation balance is less than $500,000, then you could more than likely utilise this additional tax deduction.
Example 2:
If you have sold shares or an investment property and realised a capital gain, you may be able to introduce this strategy to reduce your capital gains tax liability.
Example 3:
If you receive income as a beneficiary of a family trust, then this may be an opportunity to reduce your personal income tax liability.
Note that the unused concessional contribution is the sum of the shortfall in compulsory contributions over the past 5 years. That means that if you have a shortfall contribution in 2018/19, then if you do not use it this year, you will lose the benefit. For example, going back to the example of the mother who was full-time caring for her child in the 2018/19 financial year, and she has now returned to the workforce post the 2018/19 financial year, if she does not use the 2018/19 shortfall this financial year 2023/24 then it will be lost.
Note also, if you have shares that gained this year and you are unsure what the markets will do next financial year, you may consider realising some gains this year and making the unused concessional contribution for 2018/19 to reduce your personal CGT liability this year.
Finally, if your superannuation balance is close to $500,000 and you delay activating the unused concessional contribution, once the balance exceeds $500,000 in future years, all the unused concessional benefits will be lost.
Should you require further information in relation to superannuation contribution, please feel free to contact Peter Quinn by submitting an enquiry or calling us on +61 2 9580 9166 to book an obligation-free appointment.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.