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There are new superannuation laws that started in July 2020 that changed carry-forward contributions and super accounting rules in Australia. What are these new rules and what do they mean for your super?

Carry-forward concessional contributions were previously called catch-up contributions. It was announced in the 2016 Federal Budget, making the $25,000 cap to personal contribution concessions easier for individuals. This means that any unused portion of the $25,000 personal concessional contributions can be rolled over.

in the next financial year to be used within a rolling 5-year period. If the full $25,000 concessional contribution amount is not used, the unused portion can be carried forward and taken advantage of anytime. Only unused concessional contributions from 1 July 2018 can be carried forward and any unused amount will expire after 5 years.

Concessional superannuation contributions are contributions that have a lower tax rate because of special concession. These are before-tax superannuation payments. What reportable super contributions can you make that can count towards your concessional contributions? Any personal superannuation contribution you make until the $25,000 cap counts towards these contributions. Those with income less than $250,000 have a lower tax rate of 15% to incentivise them to save for retirement. This is lower than most people’s income tax so it’s an attractive way to save money.

An annual concessional super contributions cap makes it hard for people with irregular income to save for their retirement so the carry-forward scheme enables them to benefit from existing concessions available in the super system. It’s good for those who work part time or those who have taken a break from their career. It can also be good for those who suddenly find more disposable income available.

Your Total Super Balance must be less than $500,000 on 30 June of the previous financial year to be able to make a carry-forward concessional contribution. To calculate this, add the total amount of available funds in all phases on 30 June of that financial year. Contact all of your super funds and request for a current valuation of your balance and add together. Confirm your last reported super balance with the ATO through your MyGov account. If your TSB is less than $500,000, you can make carry-forward contributions. Check your tax information for the last 5 years to know the amount of concessional contributions you made each year and how much was unused. Add the unused portion for the previous 5 years together to know the amount you can carry-forward for the financial year.

Unused concessional super contributions are a good way to reduce tax in future years when you expect high income. These are tax-deductible so the more you contribute, the higher your tax-deduction will be. It is a complex process though and it can be easy to make errors so it’s good to talk to your accountant for any assistance you might need.

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Sky Accountants Ballarat

Phone: 1300 328 855

Office Address: 902 Howitt Street, Wendouree, Victoria 3355, Australia

Postal Address: PO Box 2234, Bakery Hill, Victoria 3354

Sky Accountants Gisborne & Macedon Ranges

Phone: 03 97444522

Office Address: 45 Hamilton Street, Gisborne, Victoria 3437, Australia

Postal Address: PO Box 270 Gisborne Victoria 3437