You could be missing out on the benefits of a new superannuation rule and not even realise it.
The new rule went into effect July 1 this year.
It allows for a catch-up claim of unused concessional contributions to the tune of $25,000 over a rolling five-year period but there’s a catch: you must have less than $500,000 in your superfund at the end of the previous financial year in order to take advantage of the carry forward benefit.
The Australian Taxation Office (ATO) gave this example:
In the 2018–19 financial year, Kate makes $10,000 in concessional contributions. This leaves an unused amount of the concessional contribution cap of $15,000, which Kate can carry forward for up to five years to increase her concessional contribution cap.
On 30 June 2019, Kate has a total superannuation balance of less than $500,000.
In the 2019–20 financial year, in addition to her normal $25,000 concessional cap, Kate can use the $15,000 of unused cap from the previous year. Kate’s total concessional cap for the 2019–20 financial year is $40,000.
The ATO says that each financial year, anyone can contribute a tax free concessional contribution of $25,000 to their superannuation fund.
Based on the example above, if you don’t take advantage of depositing the full amount into your superfund, you can than carry forward the unused amount and accumulate it over a rolling five-year period.
So if you come into a windfall, i.e., you end up being left a substantial inheritance or win Lotto, and you have less than $500,000 in your super plus you haven’t taken advantage of the annual $25,000 concessional contribution cap but have rolled it over for five years, the potential is there to deposit an additional $125,000.
The good news is, you’ve got time to plan if you choose to take advantage of the concessional contribution as the first year in which you can make additional concessional contributions by applying your unused concessional contributions cap amounts is the 2019-20 financial year.