Aaron Dunn, chief executive of Smarter SMSF, said most people are aware of the strategic opportunity that unused concessional carry-forward contributions make to their superannuation fund, but it’s important to note that there is a time limit.
“The other part that’s worth noting is, if throughout that cycle we have a period where the total super balance of a member goes above [the threshold], and we are able to see it by virtue of markets or some other amendment, for example by benefit payment, then they fall back into that five-year period,” Dunn said.
“However, they don’t get any resetting of that $500,000 of the unused portions based upon the fact that they’ve fallen back below that threshold.”
Avisers should be aware that if they have situations where clients may not have lived in Australia for the entire five-year period, there is the opportunity for them to avail themselves of the previous five-year period.
“Just because they might not have been around, or they might not have been a tax resident at that point in time, doesn’t preclude them from actually utilising that unused five-year period,” Dunn said.
Tim Miller, head of technical and education for Smarter SMSF, reiterated that if there is an opportunity for clients to utilise any unused contributions from the 2019–2020 period, they should do so now, as they will disappear from next year.
Dunn said clients may have an isolated event, such as receiving a bonus, selling assets or getting a distribution from a trust, through which they can take advantage of the carry-forward contributions.
Miller gave an example of a client who is only receiving super guarantee contributions, which will increase next year to 12 per cent.
“Their balance has been hovering around, or is under that $500,000 mark. At 30 June 2024, their balance was $495,000 so it’s quite likely that they are not ever going to be eligible for the carry-forward again, but if they use the carry-forward contribution now and make a significant contribution it could be their last opportunity to do so,” he said.
“If, for example, the client sells a property, it gives them the opportunity to look at what they haven’t used in terms of carry-forward contributions each year and determine the maximum they can put in now.”
The example continues that the client has a standard cap for the year of $30,000, and they have $82,000 from the previous years of unused amounts, giving a maximum cap of $112,000.
“What we need to understand and always appreciate is the super guarantee. Now, something that we know is coming is payday super and so super guarantee and payday super will align from a timing point of view, which is a lot neater in regards to when contributions are made because often that final quarter SG amount is made into the next year,” Miller said.
“And so you’re looking backwards to look forwards from a contribution point of view, but if we keep it simple and say this year’s super guarantee was 11.5 per cent and the total cap for the client was $112,000, it means they have the capacity to put in a or make a personal deductible contribution of $100,500. Taking the proceeds of the sale from the property, it’s significant enough that the client can most certainly put a significant amount in and claim the deduction.”
