Supercharge your Super

If you’re in your final working years and you want to supercharge your superannuation, this article will take you through one of the most effective tools for pre-retirees being the unused concessional contributions rules, also known as the carry-forward rule.

If you’ve ignored making personal contributions to super, you can make up for it. The Government provides a number of tax incentives to save for your own retirement and the carry-forward rules allows you to go into catch-up mode.

Now this provision can be applied effectively in a number of different scenarios to accelerate your retirement wealth and save significant amounts of tax in some cases.

Generally speaking, the opportunities for tax savings exist for people earning above $50,000, or selling investment properties, and anyone approaching retirement who has recently freed up cash, just to name a few.

This article explains how it works, what you need to know, what scenarios someone could benefit, with case studies, and where to look for your contribution history. 

What is a concessional contribution?

Firstly lets take a look at what is a concessional contribution. Essentially, these are the super contributions that are taxed at a low rate of 15% rather than your personal marginal tax rate, and includes:

• Employer contributions, currently 12% of your pay
• Any salary sacrifice through your pay
• Any lump sum tax deductible contributions you make

The annual limit for total concessional contributions changes every few years, but is currently $30,000 for the 2025/26 financial year. Salary sacrifice or making a lump sum tax deductible contributions can be a very effective approach if your marginal tax brackets is higher than 15%.

For example, for someone earning $100,000 per annum, your income is taxed in the 32% bracket including Medicare levy, so any personal concessional to super would represent a 17% tax savings on your money. 

What is the carry-forward rule?

The catch-up provision allows you to carry forward the unused limits from the previous 5 financial years and into the current financial year, providing that you are eligible.

If your total superannuation balance tips over $500,000 mark at the earlier 30 June mark, then unfortunately you are ineligible. Your “total superannuation balance” also includes any account based pension savings or defined benefits.

Also there are significant age milestones to factor in your plan, the first one being age 75 when you cannot contribute your own money to super. Secondly, age 67, where you need to satisfy “Work test” rules to be able to contribute concessional amounts.

Essentially, the rules allow for the more modest superannuation balances to be supercharged, but not the more established balances above half a million. 

Let’s look at an example for someone earning $100,000 in today’s dollars, has never made personal contributions to super and has total super balance below $500,000 as at 30 June 2025.

This chart shows the difference between the allowable contribution limit for each of the previous 5 years in magenta, and the pink bars representing the mandated employer contribution history. For each year there is a gap, as roughly 1/3rd of the limit is being used each year.

The total unused amount in this example is just under $90,000 which can be rolled forward to the current financial year.

It’s worth noting that in this case you have until the end of the 2025/26 financial year to use the unused limit from the 2020/21 financial year, before it falls outside the 5 year window. So use it or lose it. 

Now for some people, $90,000 may be too much to contribute or even not tax effective to make this in a single year. As financial planners, we speak to our clients about the strategies to stretch this allowance over 1,2 or even 3 years.

There are also different client scenarios relating to the sale or planning to sell an investment with a sizeable capital gain, for example an investment property. With the growth of residential property values, there are pre-retirees planning to cash in their property investment and to simplify their finances at retirement, with a big consideration being the capital gains tax.

The timing of using the carry-forward strategy can be very useful for those that are eligible and can take away a big chunk or tax, in the tens of thousands of tax for some.

Using the earlier example, if the person was to sell their investment property in 2025/26 financial year with a $200,000 gain, an additional taxable income of $100,000 would be triggered and after the 50% discount.

Using the $90,000 of  unused contributions from previous years and applying as a tax deductible contribution to super, this could save just over $20,000 in tax and even after allowing for the 15% contribution tax rate. 

Risks and Considerations

If you’re planning to contribute to super you have to be comfortable with the money being tied up in the superannuation preservation status, so you may not have access until you meet a retirement condition of release or satisfy other compassionate grounds.

Also, with any investment there is risk associated with the value of your money fluctuating over the short to long term, so I would encourage you to get advice on not only the appropriateness of contributing to super but what investment approach would suit your preferences, goals, attitude to investing and timeframe until retirement.

Lastly, exceeding the limits can incur penalty tax rates and charges from the ATO, so speak with a financial adviser to plan the right approach and to not go over the limits. 

Where to look?

When it comes to looking for your contribution history, the source of truth is the ATO, and you can retrieve this information pretty easily from your myGov ATO portal. There is a lot of important information about your superannuation that is reported to the ATO, and to help you plan for the use of carry-forward rules, the ATO neatly presents the information that is reported by your super funds.

However, it is certainly worthwhile cross checking this information with your financial adviser or superannuation fund, as there are delays in contribution reporting to the ATO and accuracy issues, particularly for SMSF.

Summary

If you’re planning to sell property, expecting a large gain, or just want to catch up on missed contributions, the carry-forward concessional rule can be a game-changer. The timing and the rules matter, and it is important that the strategy must fit a particular purpose. It’s certainly not for everyone.

Shaun Jones MAppFin (FP) 
Financial Planner at About Retirement