This month highlights the power of unused concessional caps when paired with timing and advice.
Our feature story, led by Senior Financial Adviser Chris Herdman, shows how a couple aged 67 and 55 used careful sequencing to reduce a potential $40,000 tax assessment to about $5,500, all while strengthening their retirement position.
Case study article
Using unused concessional caps before retirement: How smart sequencing saved one couple nearly $18,000 in tax
For many Australians approaching retirement, one of the most overlooked opportunities is the ability to use unused concessional caps to cut tax, boost super balances, and structure their final working years more efficiently.
It’s a strategy that can make a significant difference for clients with super balances under $500,000 – and even more so for those with a meaningful capital gain in the lead-up to retirement.
Recently, our Senior Financial Adviser Chris Herdman worked with a couple where careful planning across two financial years reduced their expected tax bill by almost half. The result was a smoother transition into retirement, a much stronger combined super position, and a level of peace of mind they didn’t think was possible.
Below is how the strategy unfolded.
The clients: Different ages, different retirement timelines
Chris met the couple in early 2025. One was 67 and had just retired. The other was 55, still working and planning to continue for several more years.
They had two key goals:
- Make retirement affordable and sustainable.
- Reduce unnecessary tax while boosting their long-term super balances.
They also owned an investment property that had grown significantly since 2009. Selling it would trigger a material capital gain, and timing that sale was going to be critical.
Step one: The younger partner uses carry-forward caps
The 55-year-old was still earning, so Chris began by using a portion of their unused concessional cap to make a $40,000 deductible contribution in FY2025. The tax deduction generated a $14,000 refund that year.
Because the older partner was already retired and had minimal taxable income, this first step was focused on the working spouse. With the couple pooling income and expenses, it gave them immediate breathing room without affecting cash flow.
Step two: Preparing the older partner for the work test exemption
The bigger opportunity was for the 67-year-old, who had recently finished work and was planning to sell the investment property.
Chris identified a critical window:
If the client’s total super balance could be reduced below $300,000 by 30 June 2025, he would qualify for the work test exemption in FY2026.
That exemption would allow him to make deductible concessional contributions in the following financial year, even though he was no longer working.
This required careful sequencing.
At the time, his super balance was approximately $350,000. By withdrawing a portion of his super before 30 June – something he could do because he had met a full condition of release – Chris brought his balance down to $296,000. This step unlocked the exemption for the next financial year.
As Chris put it:
“It’s never too early to start planning for retirement. You can actually plan out these timelines.”
Step three: Timing the property sale
By early FY2026, the investment property tenant was preparing to move out, which created the ideal moment to sell.
Selling in FY2026 – after the older partner had qualified for the work test exemption – meant they could use his unused concessional caps from the previous five years, which totalled $109,000.
The numbers tell the story clearly.
Without planning, the estimated tax on the capital gain would have been roughly $40,000.
With the concessional contribution strategy:
- The taxable capital gain was reduced substantially.
- The personal tax payable dropped to about $5,500.
- The super fund paid $16,300 in contributions tax.
- Total effective savings came to around $18,000.
Step four: Transforming their retirement position
After the property sale and contributions were complete, the impact on their retirement outlook was profound.
The older partner’s super grew from $350,000 to approximately $850,000, now sitting inside a tax-free environment.
Surplus proceeds were also used to boost the younger partner’s super while she remained under preservation age, strengthening their long-term joint retirement assets.
For both, the change wasn’t just financial. It was emotional.
They had been nervous about the cost of advice. They weren’t sure how to navigate retirement, tax, or whether they were “too late” to fix their situation. A friend referred them, and they decided to trust the process.
As Chris recalls, the client told him:
“I’m glad we met you because literally we’d not have been able to do this ourselves. You’ve saved us more than what the cost could ever have been.”
Why this strategy worked
A few elements made this case successful:
- The clients’ combined super balances were under $500,000.
- One partner met the work test in the prior financial year.
- They were willing to adjust their super balance to access the exemption.
- The capital gain was significant enough that timing mattered.
- They were open to advice and acted early enough to plan across two financial years.
These situations aren’t common, but they’re far from rare. As Chris notes, many older clients have unused concessional caps simply because they weren’t aware of them – or didn’t realise the opportunities available once they reach 60 or 65.
“In theory it’s never too late, but my rule of thumb is it’s also never too early,” he says.
The bigger message: It’s not just about tax
The technical strategy delivered a strong financial result, but the clients valued something even more meaningful: certainty.
Chris’s modelling showed them how long their income stream could last, the tax advantages of holding assets in super, and how to make the most of their final working years. For clients who had been self-employed, the stability was a relief.
“Clients gain real peace of mind when they can see the plan. Knowing your money is structured properly gives tremendous comfort as you approach retirement.”
Key takeaway
Unused concessional caps, when combined with the work test exemption and good sequencing, can create powerful financial outcomes. But timing and eligibility are everything.
This case shows that well-structured advice can turn an uncertain tax burden into a strategic opportunity and transform a couple’s confidence about retirement in the process.