This rule allows people whose superannuation balance is less than $500,000 to catch up on any concessional (tax deductible) contributions they were eligible to make in the previous five years but didn't.

It will give many people a large additional tax deduction and result in substantial tax refunds. Many people who could afford to do not maximise their tax-deductible super contributions.

Financial advisers frequently recommend people do so because it builds retirement savings and provides major tax reductions.

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Most workers are in the second tax bracket. Suppose their pay office owes them $100 of pre-tax pay. If they take it as cash salary they will receive $65.50 after tax.

If they ask the pay office to put it into super instead they receive $85 in their super fund after tax. That's $19.50 of tax saved.

If the person earns over $90,000 per annum the tax saving is $24 per $100 contributed. The maximum annual concessional contributions are $25,000, including employer amounts, and it is well worth aiming to maximise them each year for those who can afford it.

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Once that is done, if the person has extra savings in the bank they can look back and see if they are eligible to contribute a catch-up amount for previous years thereby being able to contribute more than $25,000 in one year and claim a tax deduction for it.

The carry forward provision is only available to people whose super balance is less than $500,000 on 30th June prior to the contribution.

The scheme started from July 2018 and only involves contribution years from then on. Contributions will be able to be carried forward for up to five years in time.

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For example, if a person's only contributions last year were $7,000 from their employer they can put in $18,000 of carry forward contributions this year. If they do they should receive a tax refund of $6,210, or a bill reduced by that amount.

This rule will be particularly useful for people who have an abnormally high taxable income in one year. That could happen if their income varies greatly from year to year. It might also result from receiving a large bonus in one year.

It could also arise from one off events such as taxable capital gains on the sale of a property or other assets.

This new rule will have many applications so it will be essential for people and their financial advisers to keep an accurate record of exactly how much they contributed in each past year.