Getting your personal super deductions right.

Recent changes to the law mean many more Australians can now claim deductions for their personal superannuation contributions. But while the eligibility requirements have been lowered, the process for claiming deductions is not straight-forward. Do you know what steps to take and what to look out for?

What contributions can I deduct?

Provided you are eligible, superannuation contributions you make for yourself from your after-tax income are deductible. However, when you choose to deduct these amounts, they become concessional contributions (CCs) and count towards your annual CC cap of $25,000. 

The ATO says a common mistake is for individuals to incorrectly claim a deduction for pre-tax contributions such as extra salary-sacrifice amounts. Although employer contributions also count towards your CC cap, it is only personal contributions you make from your own after-tax funds that you are entitled to deduct.

When you make a personal contribution from after-tax income and you don’t claim a deduction, the amount counts towards your non-concessional contributions (NCC) cap.

Am I eligible?

Prior to 1 July 2017, only substantially self-employed individuals could deduct personal superannuation contributions. This rule has been abolished, so now even those who earn significant amounts of income as employees can potentially deduct their personal contributions. 

Today, the main eligibility requirement concerns age. You can deduct a personal contribution as long as you make the contribution within 28 days of the end of the month in which you turn 75. 

And remember, you must meet a “work test” in order to make contributions if you are aged 65 or over (proposed in the 2019 Budget to increase to age 67 from 1 July 2020). Special rules also apply to individuals under 18 years.

Restrictions also apply to contributions to certain Commonwealth public sector schemes and constitutionally protected funds and other untaxed funds.

What do I need to do?

Getting the process right is vital because an administrative misstep can jeopardise your deduction and result in your contribution counting as a non-concessional contribution rather than a concessional contribution.

You must give the trustee of your superannuation fund a notice of your intention to claim a deduction, meeting strict deadlines. The trustee must then give you an acknowledgement that they have received the notice before you can make the deduction claim in your tax return.

Watch out for the following traps. Your notice will not be valid: 

  • if the trustee had started to pay an income stream from any part of the contribution when you gave the notice.
  • if you had rolled over all of your benefits out of the fund, or withdrawn all your benefits, when you gave the notice.

Plan ahead

Because of the technicalities that can arise when claiming personal super contribution deductions, it’s best to make your contributions as part of a pre-planned strategy and with expert advice.

If you want to know more about claiming a tax deduction on your personal super contributions, contact us at The Peak Partnership.


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