Tax benefits for unused ‘carry forward’ concessional superannuation contributions
Tax benefits for unused ‘carry forward’ concessional superannuation contributions
Eligible taxpayers can claim tax deductions for unused concessional superannuation contribution caps from prior years under the carry forward rules.
This brings tax deductions into the current financial year which are in excess of the normal annual concessional contribution cap.
The fundamentals behind the ‘carry forward’ unused cap rules are outlined below.
What is a concessional superannuation contribution
A concessional contribution is a contribution that is made to your super fund before tax. They are taxed at 15% in your super fund.
Concessional contributions can come from several sources, these being from your employer, from pre-tax salary sacrificed contributions you’ve elected to make through your employer, and from contributions you have made personally where you claim a tax deduction for those contributions. The combined total of the contributions from each of these sources counts towards your concessional contribution cap.
The 2026 financial year concessional contribution cap is $30,000 and this will increase to $32,500 for the 2027 financial year. Annual caps over the last 5 years have been $25,000 in the 2021 financial year, $27,500 in the 2022, 2023 and 2024 financial years, and $30,000 in the 2025 financial year.
How the carry forward rules operate
The carry forward rules allow taxpayers to look back across prior financial years to calculate any unused portion of their concessional contributions cap, using up to 5 prior years.
Once calculated, taxpayers can ‘carry forward’ and, when desired, ‘catch up’ and claim the ‘unused’ portion of their concessional contributions caps in a later financial year. Claiming the unused portion of concessional contributions caps in a later financial year can achieve a better tax outcome for that financial year, and maximise the amount contributed to super.
The ‘unused’ cap is effectively the difference between the concessional contribution cap for the financial year less the total of all before tax contributions made in that same financial year.
Eligibility and total super balance limits
You can only claim unused super contributions from previous years if your total super balance is less than $500,000 at 30 June in the financial year before the year in which you make your ‘catch up’ contributions.
For example, if your total super balance is $450,000 at 30 June 2026, you can make catch-up contributions for your unused cap in the 2027 financial year. If your total super balance at 30 June 2026 is $550,000, you are not eligible to claim unused super contributions from previous years.
How long unused concessional caps can be carried forward
Unused concessional cap amounts can only be carried forward for a maximum of five years. The unused concessional cap amounts are used on a first-in-first-out basis, and after five years, any unused amounts expire.
What are the benefits of catch up contributions?
Making a catch-up contribution is an easy way to boost your super balance at a time when you have the financial resources to do so, while offering significant tax benefits.
The rules give greater flexibility in making contributions to a range of taxpayers, at a time that suits their personal circumstances. Some examples of this flexibility include:
- Work patterns and income may fluctuate from year to year. A tax deduction for super contributions may not be required in a low-income year but may be in the following financial year if income is significantly higher.
- Restricted cash flow may prevent making super contributions. As cash flow improves, ‘catch up’ contributions can be made.
- Usual income may mean there is little to no tax advantage in making super contributions, but the sale of a large capital asset, such as shares or rental property, results in a significant capital gain. In this instance, a ‘catch up’ contribution made by harnessing unused caps from previous years would reduce taxable income in the year of sale.
Case study
In the 2024 financial year, Virginia was employed on a full-time basis. The superannuation contributions from her employer and salary sacrificed pre-tax contributions totalled $27,500. In that financial year, Virginia maximised her concessional contributions cap and has no ‘unused cap’ to carry forward.
During the 2025 financial year, Virginia lost her job. Her employer had made $8,000 in super guarantee contributions during that financial year. Virginia was concerned about her short-term employment prospects and chose to make no personal super contributions in that year. At the end of the 2025 financial year, Virginia had an unused cap amount of $22,000 - the annual concessional contributions cap of $30,000, minus the $8,000 employer super guarantee contributions.
Virginia remained unemployed throughout the 2026 financial year and made no personal contributions. Her concessional contributions cap for that year was again $30,000, with the total amount counting towards her unused cap. Virginia’s total unused cap of $52,000 across the 2025 and 2026 financial years carries forward to the 2027 financial year - $22,000 from the 2025 financial year plus $30,000 from the 2026 financial year.
During the 2027 financial year, Virginia finds employment and her employer pays $16,000 in super guarantee contributions to her fund.
Virginia’s total super balance at 30 June 2026 is $468,000. Because this is under $500,000, she is eligible to utilise all the unused cap of $52,000 from the previous two financial years.
In addition, Virginia has a 2027 financial year cap of $16,500 remaining, which is the 2027 cap limit of $32,500, minus the $16,000 employer super guarantee contributions made by her employer.
Virginia can make a total concessional contribution of $68,500 in the 2027 financial year, which provides an immediate tax benefit by reducing her taxable income and allowing her to boost her super balance.
After contributing the$68,500, Virginia has no unused cap to carry forward to the 2028 financial year, but will continue to accumulate cap space in future years if she chooses not to maximise her concessional cap.
It is unlikely she will use her unused cap space again in future years, given her total super balance at 30 June 2027 may exceed the $500,000 threshold once contributions are made during the 2027 financial year.
|
Financial year |
Concessional contributions made in the year |
Concessional contributions cap for the year |
Unused concessional cap for the year |
Cumulative unused cap to carry forward |
|
2024 |
$27,500 |
$27,500 |
0 |
0 |
|
2025 |
$8,000 |
$30,000 |
$22,000 |
$22,000 |
|
2026 |
0 |
$30,000 |
$30,000 |
$52,000 |
|
2027 |
$84,500 |
$32,500 |
0 |
0 |
|
Total |
$120,000 |
$120,000 |
$52000 |
0 |
Note:
The $84,500 contributions made during the 2027 financial year are the combination of Virginia’s employer’s super guarantee contribution of $16,000, plus the remaining concessional cap in 2027 of $16,500, plus her full cumulative unused carry forward cap of $52,000.
How BDO can help
Concessional superannuation contributions can be complex. Speak with BDO's superannuation team or your local adviser to understand eligibility, contribution caps and how to use unused carry-forward caps effectively.
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