Edited version of private advice

Authorisation Number: 1052182564816

Date of advice: 22 November 2023

Ruling

Subject: Unused concessional contributions cap - 5 year carry forward

Question

Under section 291-20 of the Income Tax Assessment Act 1997 (ITAA 1997), is the Taxpayer, able to increase his concessional contribution cap in the 2023-24 financial year, by applying previously unused concessional contributions cap amounts accrued from the 2018-19 to 2022-23 financial years inclusive?

Answer

Yes.

This advice applies for the following:

Year ended 30 June 2019 to year ending 30 June 2024

The scheme commenced on:

1 July 2018

Relevant facts and circumstances

The Taxpayer turned 56 in the 2023-24 financial year.

From 2017 to 2022 the Taxpayer was an Australian resident, being the holder of a Partner Visa Subclass 100.

In 2021, the Taxpayer commenced employment in Australia in a government position.

The Taxpayer became an Australian resident for tax purposes in the 2021-22 financial year.

The Taxpayer's total super balance (TSB) was less than $XXX as at 30 June 2023.

No superannuation contributions (concessional or non-concessional) were reported for the financial years prior to the 2021-22 financial year.

The Taxpayer's concessional contributions in the 2021-22 and 2022-23 financial years, were a mixture of superannuation guarantee contributions and personal contributions for which a deduction was claimed.

Relevant legislative provision

Income Tax Assessment Act 1997 section 291-20

Reasons for decision

Issue 1

Unused concessional contributions cap - 5 year carry forward

Question

Under section 291-20 of the ITAA 1997, is the Taxpayer, able to increase his concessional contribution cap in the 2023-24 financial year, by applying previously unused concessional contributions cap amounts accrued from the 2018-19 to 2022-23 financial years inclusive?

Summary

Under section 291-20 of the ITAA 1997, the Taxpayer is able to increase his concessional contribution cap in the 2023-24 financial year, by making excess concessional contributions in that year and applying previously unused concessional contributions cap amounts accrued from the 2018-19 to 2022-23 financial years inclusive.

Detailed reasoning

The concessional contributions cap amounts are: $25,000 for the 2018-19 to 2020-21 financial years inclusive; and $27,500 for the 2021-22 to 2023-24 financial years inclusive.

The 'unused concessional contributions cap' and the 'total superannuation balance' are defined in the ITAA 1997 as follows:

Section 291-20 Your excess concessional contributions for a financial year

...

Five year carry forward of unused concessional contributions cap

291-20(3)

However, your concessional contributions cap for the *financial year is increased in accordance with subsection (4) if:

(a) your *concessional contributions for the year would otherwise exceed your concessional contributions cap for the year; and

(b) your *total superannuation balance just before the start of the financial year is less than $500,000; and

(c) you have previously unapplied *unused concessional contributions cap for one or more of the previous 5 financial years.

291-20(4)

Apply your unapplied *unused concessional contributions cap for each of the previous 5 *financial years to increase your *concessional contributions cap (but not by more than the excess from paragraph (3)(a)).

291-20(5)

For the purposes of increasing your *concessional contributions cap under subsection (4), apply amounts of *unused concessional contributions cap for previous *financial years in order from the earliest year to the most recent year.

Your unused concessional contributions cap

291-20(6)

You have unused concessional contributions cap for a *financial year if the amount of your *concessional contributions for the year falls short of your *concessional contributions cap for the year. The amount of the unused concessional contributions cap is the amount of the shortfall.

291-20(7)

However, you do not have unused concessional contributions cap for a *financial year earlier than the 2018-2019 financial year.

Section307-230 Total Superannuation balance

Your total superannuation balance , at a particular time, is the sum of the following:

(a) if you have one or more *superannuation interests that are not in the *retirement phase - the *accumulation phase values, at that time, of each such interest;

(b) if you have a *transfer balance account - the *transfer balance of the account at that time (but not less than nil);

(c) the amount of each *roll-over superannuation benefit:

...

Application to your circumstances

(Legislative references are to the ITAA 1997)

The Taxpayer did not meet or exceed his concessional contributions cap (CCC) for any of the years from 2018-19 to 2022-23 inclusive. As such, he has unused CCC for those 5 financial years.

The Taxpayer intends to make excess concessional contributions in the 2023-24 financial year.

The Taxpayer's TSB was under $XXX as at 30 June 2023.

Accordingly, the Taxpayer meets the 3 conditions under subsection 291-20(3) and is able to increase his CCC for the 2023-24 financial year.

Under 291-20(4), the amount by which the Taxpayer can increase his CCC will be limited to his unapplied unused CCC for each of the previous 5 financial years being: $25,000 for the 2018-19 to 2020-21 years inclusive; $608.66 for 2021-22 year; and $2,240.88 for 2022-23 year. These amounts aggregate to $77,849.54 of unapplied unused CCC which may be utilised in the 2023-24 financial year.

In increasing his CCC for the 2023-24 financial year, the Taxpayer will need to apply amounts of unused CCC for previous financial years in order from the earliest year, which in this case is 2018-19, to the most recent year in accordance with 291-20(5).

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