Keep calm and carry forward
Ready to take your super to the next level? The carry forward rule may help you get there. It might sound like financial jargon, but trust us, it could be a game-changer for your nest egg.
So, what exactly is the carry forward rule? It relates to how much money you can contribute to super each year.
You can make before-tax (concessional) contributions to your super of up to $30,000 this financial year. This cap, known as the concessional contributions cap, includes contributions made by an employer, salary sacrifice contributions, and personal deductible contributions.
The government set the contributions cap to ensure that everyone, regardless of wealth, receive an equitable tax treatment. Here’s the kicker, if you exceed the cap you’ll be subject to additional tax. Nobody wants to be hit with extra taxes so it’s important to be alert to your limit, but also make the most of it as additional before-tax contributions to your super can reduce your taxable income.
This is where the carry forward rule comes in. It lets you catch up on your super contributions from previous years, allowing you to exceed your cap by carrying forward any unused portions from the previous 5 years.
Let’s break it down in plain English. Say you’ve been too busy living life to max out your super contributions in previous years. With the carry forward rule, you can make up for lost time by carrying forward any unused portions of your annual concessional contribution cap for up to five years.
This means you can grow your super in a big way. But this isn’t just about catching up, it’s also about strategic planning. Let’s say you’ve had a particularly lucrative year, you can funnel it into your super and take advantage of tax benefits while boosting your super.
Carry forward rule in action
Magda did not work in the 2020/21 financial year (note the concessional contribution cap before 1 July 2021 was $25,000).
Magda made total before-tax (concessional) contributions of $22,500 in the 2021/22 financial year, which is $5,000 less than the annual cap amount of $27,500.
Magda took 12 months maternity leave in the 2022/23 and didn’t make any contributions.
Magda returned to work part-time in 2023/24, where her employer made pre-tax contributions totaling $9,000, which is $18,500 less than the annual cap amount of $27,500.
| Financial year | Annual concessional contribution cap | Before-tax contributions made | Unused cap carried forward |
| 2020/21 | $25,000 | $0 | $25,000 |
| 2021/22 | $27,500 | $22,500 | $5,000 |
| 2022/23 | $27,500 | $0 | $27,500 |
| 2023/24 | $27,500 | $9,000 | $18,500 |
| 2024/25 | $30,500 | $0 | $30,000 |
| Total | $137,500 | $31,500 | $106,000 |
This means Magda can carry forward and contribute up to $106,000 in 2024/25.
The nitty gritty
The carry forward rule applies to your concessional contributions, which include employer contributions, salary sacrifice, and personal deductible contributions. Plus there are a few caveats to keep in mind. You must be under 75 years old to use the carry forward rule, and you must have a total super balance of less than $500,000 at the end of the previous financial year.
How to carry forward
With proper planning and a bit of number crunching, you can make the most of the carry forward rule to boost your super. If you have an unused cap amount that you’d like to carry forward from an earlier year, you can have contributions deducted from your salary by chatting to your payroll team.
Let us help you
While carry forward rules may seem complex at first, they offer a great opportunity to really grow your super. Consulting with a financial advisor can help you navigate the intricacies of contributing to super and you can get guidance at no extra cost over the phone.
Information correct as at 1 November 2024