Most people in fairness aren’t eligible to claim a $157,500 tax deduction, nor does everyone have the income to fully utilise such an opportunity. However, there exists a powerful yet underutilised strategy within superannuation that could significantly alter your tax situation.
What’s the strategy?
It’s all about leveraging unused carry forward concessional contributions. Since the 2018/19 financial year, those with total super balances below $500,000 have been allowed to carry forward unused concessional contributions for up to five years.
For the first time, this allows eligible individuals to utilise five years’ worth of unused concessional contributions in addition to this year’s concessional cap.
Who can benefit?
This strategy particularly benefits those who have had irregular income patterns or significant changes in their earnings. Examples include individuals returning to high income roles after a break, expatriates who’ve spent several years abroad or anyone expecting substantial one-time income from say a large capital gain.
Imagine this scenario: if you haven’t made any concessional contributions in the past five years, you could have up to $130,000 in unused concessional contributions available plus this year’s limit of $27,500.
How can you check your eligibility?
You can find your carry forward concessional contributions through your myGov account (ATO link) or your accountant or tax agent can provide these details. It’s crucial to verify these figures for accuracy. Check your past contributions against records from your super fund and ensure all data aligns. This is particularly important if you have a self-managed super fund as there may be delays in tax reporting.
Why is accuracy important?
Contributing beyond the concessional caps can lead to adverse tax consequences. Precision in your contributions ensures you maximise benefits without overstepping the limits.
Final thoughts
While this strategy isn’t for everyone, it offers substantial tax savings for those who can utilise it. Always consult with a financial adviser to tailor this strategy to your specific financial circumstances. It’s not just about taxation minimisation; it’s also about making your super work smarter for you.
Phone 03 8610 6396
Email: info@keepwp.com.au
Keep Wealth Partners Pty Ltd (AFSL 494858)
This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from a financial planner who can consider if the strategies and products are right for you.
