RSM Australia

A super second chance for tax deductions

Tax Insights

When it comes to tax matters we plan and often rush madly to put things in place by the end of the financial year. If we don’t it’s usually a missed opportunity that has passed never to return, leaving us to bemoan “If I could turn back time”.

This has been the case for claiming tax deductions for superannuation contributions, otherwise known as an individual’s concessional contributions, made through:

  • Employer superannuation guarantee contributions
  • Salary sacrificed wages by an employer on their behalf
  • Personal deductible contributions

For those eligible to make concessional contributions there is now a single, annual cap of $25,000. You must be aged less than 65 years, or, if aged 65 to 74 years pass the work test (unless your total super balance is below $300,000). Unfortunately, you are not eligible if you are 75 or older.

If you haven’t contributed the full cap in 2018/19 you now have another chance!

carry forward the contributions to 2023/24 if not utilised earlier.Commencing from this financial year you can now contribute the unused portion of your concessional contributions cap, the ‘carry-forward’ amount, from last financial year if your total super balance is below $500,000. Unused amounts are carried forward and are available for up to five years, following this period they will expire. So you may have as many as five chances to make use of your unused cap where it is carried forward!

With no contributions made in 2018/19 you could carry forward $25,000 to this financial year and contribute up to $50,000. However, it is possible to carry forward the contributions to 2023/24 if not utilised earlier. As unused caps are carried forward on a rolling five year basis it is important to keep track of these amounts to know your limit for future use.

An individual’s cap could be as high as $150,000 in a single year through utilising unused concessional contribution caps from the previous five years. 

This change has been implemented to provide people with interrupted work patterns or fluctuating and irregular income an avenue to accumulate more superannuation savings for retirement. It provides the opportunity to ‘catch-up’ if they have the capacity and opt to do so. A varied income profile is typical of many farm enterprises and this valuable measure could be very beneficial.

It can provide taxpayers with the opportunity:

  • to utilise otherwise unapplied tax-deductible caps;
  • to increase funds in superannuation;
  • to contribute an amount that was late or disallowed in a previous year;
  • to increase deductions above the standard $25,000 cap; and
  •  to postpone deductions for personal contributions to a later financial year when there is higher income.

Talk to your local trusted advisors to see if you have a second chance to catch-up.

For more information about the content in this article please get in touch with your local RSM office today.

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