Carry Forward Concessional Contributions Tax Planning Strategies for 2025
Carry Forward Concessional Contributions can assist in your tax planning strategy for 2025 .
As a small business owner, navigating the tax landscape can save money and help you grow your financial future.
One area worth exploring is carry-forward concessional contributions. This tax strategy enables you to boost your retirement savings while potentially reducing your tax liability, especially for those in their 50s who have not had sufficient cash flow to contribute in the past. We also use the strategy for those one of big tax bills, such as capital gains, that can sometimes help dilute your tax bill.
What Are Carry Forward Concessional Contributions?
Carry forward concessional contributions, also referred to as “catch-up contributions.”
These contributions fall under the category of concessional (before-tax) contributions, which include:
- Employer contributions (such as the Superannuation Guarantee and salary sacrifice contributions).
- Personal contributions that you claim as a tax deduction.
The annual concessional contributions cap for the 2024/25 financial year is $30,000.
If you haven’t fully utilized your cap in the past five years, you can use the unused portions, provided you meet eligibility criteria. This means you could contribute more than $30,000 this year to your super fund, catching up on missed opportunities to save for retirement. We will discuss some conditions.
Benefits of Carry Forward Concessional Contributions
- Tax Savings
Super contributions are taxed at 15% (or up to 30% for higher-income earners), this is significantly lower than the top marginal tax rate of 47%. Making additional concessional contributions, can reduce your taxable income and lower your tax liability. - Boost Retirement Savings
Unused caps allow you to add extra funds to your superannuation, helping you grow your retirement nest egg faster, particularly if you’ve had career breaks or limited super contributions in the past. - Flexible Planning
This strategy is ideal for business owners who may have variable incomes. You can contribute extra during high-income years to maximize tax savings and super growth.
Who Can Benefit?
Meet John – Aim Maximizing Tax Savings
John, aged 50, has a super balance of $480,000. After receiving a substantial bonus, he makes additional concessional contributions using unused caps from the past five years. This strategy reduces his taxable income for 2024/25 and accelerates his retirement savings.
Meet Lisa – Accelerating Savings Before Retirement
In her late 50s, Lisa has a super balance of $300,000 and plans to retire soon. She uses carry-forward contributions to add extra to her super while lowering her taxable income in the critical years before retirement.
YOU must meet the Eligibility for Carry Forward Concessional Contributions to use this strategy
To take advantage of this strategy, you must meet these criteria:
- Age Limit: You must be under 75 years old, and contributions must be made within 28 days after the month you turn 75.
- Super Balance: Your total super balance must be less than $500,000 as of 30 June of the previous financial year.
- Unused Caps: Only unused amounts from the previous five financial years (starting from 2019/20) are eligible.
- Work Test: If you’re over 67, you must satisfy “the work test” or qualify for a work test exemption to claim tax deductions for personal contributions.
As your accountant, we can check your super balance with the ATO. This will determine your eligibility and the available unused caps and work with you on a suitable strategy.
Important Considerations
- Contribution Caps
Your concessional contributions cap includes employer contributions. Exceeding the cap could result in additional taxes. - Timing
Your super fund must receive contributions within the relevant financial year. For those nearing 75, timing is especially critical. - Access Restrictions
Super contributions are generally inaccessible until you meet a condition of release, such as retiring after age 60. - Tax Deductions
To claim a tax deduction for personal contributions, you must submit a valid notice of intent to your super fund within the required timeframe.
Bring Forward Rules vs. Carry Forward Contributions
While carry-forward rules apply to before-tax contributions, bring-forward rules apply to after-tax contributions, enabling you to make more significant lump-sum contributions.
For example, the bring forward rule allows up to $360,000 after-tax contributions in one year if your total super balance is under $1.9 million.
Each rule serves a different purpose and forms part of your overall retirement strategy.
Ready to Act? Let’s work on your plan today rather than in late June
As a small business owner, leveraging carry-forward concessional contributions can be a powerful way to save for retirement while reducing your tax burden.
Taking proactive steps now can set you up for a secure and comfortable retirement. Please note that the information is general, and please see us to clarify your own situation.
Contact if you need help with your tax planning strategy.
