The devil is in the detail.
A member who is eligible to make concessional contributions may claim this year’s cap ($30k in 2024/2025) plus any unused cap for the last 5 years. This essentially means that 6 years unused concessional caps, can be used in the current year.
To be eligible, the member must have a total super balance of less than $500k as at 30 June 2024. If the member is marginally over this cap, this may be rectified by retrospectively lowering their total super balance. This can occur as SMSF accounts are generally reported at gross valuations thus overstating the total super balance, which is based on net values. So, for example, the amount of a member’s balance that is referrable to direct real estate can readily be reduced by at least 5% when selling costs are considered. Lodging a TBEN with the ATO will lower the member’s 30 June 2024 total super balance accordingly.
Having turned 67, a member will need to satisfy the work test or be eligible for an exemption to claim a tax deduction on contributions.
Members who are entering the superannuation system for the first time, such as an 18-year-old or a “new” Australian will automatically be eligible for the full previous 5 year’s unused amount, plus this one of course. That could amount to a concessional contribution totaling $162,500.
Though this feature is usually used to enhance after tax wealth in a year of significant income, including taxable capital gains, it can also enhance an account equalisation strategy as the full after-tax contribution amount can be split to a spouse, generally in the year following the contribution. It may also be considered as an accessibility strategy where the split is made from a member who is below preservation age to one who is not.
Any contributions made this year will be applied, firstly, to this year’s cap. Any excess will be applied to the oldest year, etc., until the total is utilised. This is a “use it or lose it” concession. Any unused cap for the 2019/2020 year, not used in the 2024/2025 year, will be lost.
