There are certain super strategies available to self-managed super fund (SMSF) members that are not readily available to members in industry or retail super funds. One of these is the use of an unallocated contributions account, otherwise referred to as a contributions reserve.
When used correctly, a contributions-reserving strategy can allow an eligible SMSF member to claim a deduction for a personal contribution in the year the fund receives it while having the contribution count towards the following year’s concessional contributions cap. The strategy changes timing only: it does not increase either year’s cap.
What is contributions reserving?
Under the superannuation regulations, SMSF trustees generally have a period of 28 days from the end of the month that they receive a contribution to allocate that contribution to a fund member. For instance, a contribution received by an SMSF in November must generally be allocated to a member’s account within 28 days after 30 November.
This raises timing issues and opportunities when a contribution is received by an SMSF in June of a financial year but does not need to be allocated to a specific member until July the following financial year.
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Find out moreTiming: Tax rules versus contribution cap rules
The timing of when a contribution is ‘made’ differs for tax and contributions cap purposes.
For fund tax purposes, a contribution is generally recognised when the fund receives it. A personal contribution received in June may be deductible to the contributor in that financial year if the contributor is eligible to claim a deduction and has given the fund a valid notice of intent that the fund has acknowledged. The SMSF would then include the assessable contribution in its income for that year.
For contribution cap purposes, the amount is only assessed against the member’s contribution cap when it is allocated to the member’s account. Therefore, under the contributions-reserving strategy, the contribution may count towards the member’s concessional contributions cap in the following financial year.
The difference in reporting for tax and cap purposes will often result in a ‘mismatch’ of information that is reported to the Australian Taxation Office (ATO). The fund’s reported total contributions received will not align with the contribution deductions being claimed by the fund members.
To address this, the ATO requires the lodgement of a ‘Request to adjust concessional contributions’ form. This form notifies the ATO that concessional contributions have been received in one financial year (year 1) but are allocated to the members’ accounts in the next financial year (year 2).
To use the strategy effectively, the SMSF member must lodge the ATO’s ’Request to adjust concessional contributions’ form after the contribution has been made and allocated. The ATO recommends lodging it before, or at the same time as, the fund’s SMSF annual return and the member’s individual tax return so that the contribution is applied to the correct cap year.
How does it work?
In its simplest form, contributions reserving allows an SMSF to receive a contribution in one financial year and allocate it to a member in the next. If all legal and reporting requirements are met, the contribution may be deductible in the year it is received while counting towards the member’s concessional contributions cap in the year it is allocated.
The contributions made into your SMSF bank account in June are placed into a contributions reserve account (often referred to as an unallocated contributions account), before being allocated to your member account by 28 July of the following financial year at the latest.
Where you are eligible, you may be able to then claim two years’ concessional contributions as a tax deduction in the year the contributions were received by your SMSF.
How contributions reserving works
Case study
Elias is aged 60 and receives total employer and salary-sacrifice contributions into his SMSF of $30,000 in the 2025–26 financial year, using up his concessional contributions cap for the year.
In June 2026, he makes a further personal concessional contribution of $30,000, which is held as an unallocated contribution.
The SMSF includes total concessional contributions of $60,000 in the 2025–26 SMSF annual return. Assuming the standard 15% contributions tax rate applies, it will result in $9,000 in contributions tax (15% x $60,000 = $9,000).
Elias may claim a tax deduction for his $30,000 personal contribution in his 2025–26 personal tax return, provided he is eligible and has given the SMSF a valid notice of intent to claim a deduction that the fund has acknowledged.
He must also complete a Request to adjust concessional contributions form and lodge it with the ATO.
The $30,000 in employer and salary-sacrifice contributions will count towards Elias’ concessional contributions cap for the 2025–26 financial year as normal. However, the $30,000 contribution he makes in June 2026 will count towards his concessional contributions cap for the 2026–27 financial year.
This means that Elias would have already used up $30,000 of his $32,500 concessional contributions cap for 2026–27.
There is also potential for high-income earners hovering around the $250,000 Division 293 tax threshold to use a contributions-reserving strategy, especially where they have earnings that fluctuate significantly from year to year.
Under the Division 293 rules, if your income and concessional contributions total more than $250,000, you may be liable for an additional 15% tax on your super contributions.
Importantly, only concessional contributions that are allocated to a member’s account are included for the purposes of calculating a member’s adjusted taxable income for Division 293 purposes.
Take the example of Gino.
Dotting your i’s and crossing your t’s
As for everything to do with SMSFs, as a member and trustee, you need to keep records to back up your contributions reserving activity.
For starters, your fund’s trust deed must include provisions to enable contributions reserving.
The ATO provides these examples of records you need to keep:
- A resolution by trustees in year one in accordance with the SMSF’s governing rules not to allocate the contribution when it is made but to accept it into an unallocated contributions account (reserve)
- Evidence of a receipt of the contribution by the SMSF
- A resolution by trustees to allocate the contribution from the unallocated contributions account in year two
- Documentation in relation to any deductible personal contributions (notices and acknowledgements).
Tips and traps
While contributions reserving can be a useful way to boost your super in a tax-effective manner, there are some issues to watch out for.
Next year’s cap
There are significant benefits for some SMSF members in using an unallocated contributions strategy. However, you need to keep in mind that any amount allocated in the following financial year counts towards that year’s contributions cap.
Members must therefore allow for any reserved amount when planning employer, salary-sacrifice and personal contributions for that year.
Non-concessional contributions
While the ATO provides clear instructions and a Request to adjust concessional contributions form for SMSFs wanting to use contributions reserving to bring forward concessional contributions, it is silent on non-concessional contributions.
That doesn’t mean you can’t use contributions reserving for non-concessional contributions. In years gone by, this strategy may have been attractive for members aged over 67 who were planning to retire and wished to bring forward the following year’s non-concessional contributions cap to a year in which they still met the work test.
However, the removal of the work test for making non-concessional super contributions for people aged 67 to 74 may diminish the appeal or need to make use of a non-concessional reserving strategy.
Trustees considering reserving a non-concessional contribution should obtain specialist advice before proceeding. The advice should cover allocation, reporting and contribution-cap treatment, as well as any requirements in the SMSF’s trust deed.
Separate contributions
It is considered best practice to make the amount intended for the unallocated contributions account as a separate transaction. This creates a clearer audit trail and helps trustees distinguish the reserved amount from contributions that are to be allocated immediately.
The bottom line
A contributions-reserving strategy can help eligible SMSF members bring forward the timing of a tax deduction while allocating the contribution against the following financial year’s concessional contributions cap. It does not increase the applicable caps, and the reserved amount reduces the cap space available for other concessional contributions in the following year.
The benefits of a reserving strategy are less clear cut for non-concessional contributions.
Before implementing the strategy, SMSF members should consider the need for independent tax and SMSF advice and confirm the fund’s governing rules are adhered to and that all contribution and ATO reporting obligations are met.
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