What else can I claim as tax deductions?
Have you heard of the “carry forward unused concessional super contributions” rule?
At the end of the financial year, many look to purchase new income-producing assets or make prepayments to reduce taxable income. However, prepayments are just a tax deferral rather than a tax reduction strategy.
Making additional concessional super contributions is a tax reduction strategy as concessional super contributions are a tax deduction up to their cap.
If you make or receive concessional contributions (CCs) of less than the annual concessional contributions cap, you may be able to accrue these unused amounts for use in subsequent financial years.
2018/19 was the first financial year you could accrue unused cap amounts and these amounts can be used from 1 July 2019. Unused cap amounts can be carried forward for up to five years before they expire. To be eligible to make catch-up CCs, your total super balance at the prior 30 June must be below $500,000.
In 2018/19, Mary made total CCs of $15,000, which is $10,000 less than the annual cap amount of $25,000.
She then took 12 months maternity leave from 1 July 2019 and didn’t make any CCs in 2019/20.
From 1 July 2020, Mary returned to full-time work where her CCs again totalled $15,000, which is $10,000 less than the annual cap amount of $25,000.
For the 2020/21 year, Mary would be able to make a $60,000 CC (and get a tax deduction for it) being $35,000 brought forward from 2018/19 and 2019/20 and the $25,000 CC available in the 2020/21 year. However since she only made CCs totalling $15,000, she will have a carried forward balance of $45,000.
In 2021/22 it is possible for her to make CCs totalling up to $72,500. Let’s say Mary won Lotto and contributed $50,000 in CCs in total for that financial year, using some of her carried forward CCs. She would then have $22,500 in carried forward CCs available in the next financial year.
Things to Consider:
To use up carried forwards cap amounts, you may want to make salary sacrifice or personal deductible contributions.
You can’t access your super until you meet a condition of release such as reaching preservation age and retiring.
Call us to discuss your options.