Reducing Tax by Paying into Super and Carry-Forward Contributions: Key Points

Caroline Gillies • March 27, 2025

As the end of the financial year approaches, many Australians are looking for ways to reduce their tax burden, and one effective strategy is contributing to superannuation.


Paying into super can help reduce your taxable income while also boosting your retirement savings. One of the most beneficial options is to take advantage of carry-forward contributions, which allow you to use unused concessional caps from previous years.


How Super Contributions Reduce Tax

Contributing to your super fund can lower your taxable income, as concessional contributions (before-tax contributions) are taxed at a lower rate of 15%, rather than your marginal tax rate. This means that if you’re a high-income earner, salary sacrificing or making personal deductible contributions can significantly reduce your tax bill.


The concessional contribution cap increased on 1 July 2024 to $30,000, which includes employer contributions, salary sacrifice, and personal contributions for which you claim a tax deduction.

 

Carry-Forward Contributions

The carry-forward contributions rule allows you to use unused concessional contribution caps from previous years. You can carry forward unused caps for up to five years. For instance, if you didn't reach the $27,500 cap in past years, you can make larger contributions this year by carrying forward the unused portion.


Which Financial Year is About to Drop Off?

As the 2024-25 financial year ends, unused caps from 2019–2020 will drop off on 30 June 2025. This means any unused contribution space from that year won’t be available after this date. If you haven't maximised your contributions in previous years, now is the time to catch up.


Benefits of Carrying Forward Contributions

  • Maximise Super Savings: You can top up your super by using unused cap space from previous years.
  • Tax Reduction: Making larger concessional contributions can reduce your taxable income and save on tax.
  • More Growth: Additional contributions allow for greater compounding growth in your super.

 

Things to Remember

  • To carry forward unused caps, your super balance must be less than $500,000.
  • If you exceed the concessional cap, excess contributions are taxed at your marginal rate plus an additional 15% penalty.
  • Contributions must be made by 30 June 2025 to count towards this financial year.


If you would like to take advantage of the carry-forward contributions before 30 June 2025 and need help, call us today at 4688 2500 to make an appointment.

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