Carryforward of Concessional Contribution Caps

Carryforward of Concessional Contribution Caps

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The carryforward of concessional contribution caps gives you time. It gives you time to decide.

Carryforward of Concessional Contribution Caps

It used to be a decision at the last minute. Do you top up or not?

If you don’t top up, you leave your concessional contributions at the superannuation guarantee (SG) that came with your wages.

If you do top up, you increase your concessional contributions to the relevant cap and claim a tax deduction for that top up. 

Whether you do or don’t used to be a last minute decision. It was a use it or lose it. But it no longer is. At least for five years it isn’t. You now have five years to decide.

Let’s start from the beginning.

Concessional Contribution Cap

You have a cap on concessional contributions each year. The cap is:

2018/19 – $25,000
2019/20 – $25,000
2020/21 – $25,000
2021/22 – $27,500
2022/23 – $27,500 (estimate)

This cap includes any superannuation (SG) guarantee you received. SG is the super your employer pays for you in line with your wage or salary. 

Tax Deduction

Concessional contributions are called concessional because somebody gets a tax deduction for these contributions. For SG your employer gets the tax deduction. For any top up you do.

Excess Contribution Tax

Nothing stops you from contributing more than these caps. But if you do (without a relevant rollforward), then you pay excess contribution tax.

Sometimes it makes sense to pay the additional excess contribution tax, but usually it doesn’t.

But you might not even have to, since there is the rollforward.

Rollforward

It used to be that if you didn’t use up a cap, you lost it. So if you didn’t make any concessional contributions in 2017, that unused cap was lost. But not anymore.

From 1 July 2018, you can rollforward any unused contribution caps for up to five years.

So in 2021/22 you could make a concessional contribution of $102,500 and claim a tax deduction for the full amount. Or if you wait another year until 2022/23, you could claim $130,000. Of course assuming you received no other concessional contributions in those years, so neither SG nor personal.

However, if you wait until 2023/24, then you lose the 2018/19 cap, since you are out of the 5 year period. 

So you have five years to decide, but at the end of the fifth year it is back to: Use it or lose it.

 

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Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.

work from home expenses

Working From Home Expenses

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Working from home expenses reduce your tax debt.

Working From Home Expenses

Claiming working from home expenses saves you tax and hence money. For your 2021 tax return you have three options to claim working from home expenses.

1 – Simplified Method

Under this method you claim 80 cents per hour for every hour you worked from home.

The good thing about this method is that you don’t need

a) a dedicated workspace and
b) any receipts. Just working from home is enough.

The bad thing is that you can’t claim anything else. The 80 cents covers everything.

This method finished on 30 June 2021. So you can still use it for your 2021 tax return, but after that no more. 

2 – Fixed Rate Method

Under the fixed rate method you claim 52 cents per hour for your workspace. And then you claim a proportionate amount for your internet, phone, stationary, computer in addition to this.

The good thing about this method is that it might give you a higher deduction than the simplified method, but whether it does or not of course depends on the amount of your expenses. 

The bad thing about this method is that you must have

a) a dedicated workspace and
b) receipts for everything you charge in addition to the 52 cents per hour. 

3 – Actual Cost Method

The good thing about the actual cost method is that it might give you the highest deduction of all, depending on your actual cost and the proportionate size of your workspace.

The bad thing is that you need

a) a dedicated workspace and
b) receipts for everything.

For all three methods you need diary evidence to prove the hours you worked from home. So a timesheet, roster, diary or just a list where you write down the hours you worked from home, but this is easily done.

Rent and Mortgage Interest

One tricky question is always rent or mortgage interest, because they are big ticket items about a lot of money.

If you rent your place, can you claim a part of your rent or – if you own your home – part of your mortgage interest, council fees and house insurance?

The answer for employees is No. If you are working from home as an employee and so you have work-related expenses, you can’t claim rent but just the running costs for your work space, so electricity, gas, furniture and stationary etc. 

But the answer is possibly Yes, if you run a business at home or from home and your home is your only place of business. If you own your home, there is the risk that you might lose your CGT main residence exemption, but the risk might be lower than you fear. 

Just give me a call on 0407 909 779 if you want to discuss how to maximise your tax deductions.

 

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Disclaimer: numba does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.

Liability limited by a scheme approved under Professional Standards Legislation.