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What are tax-deductible super contributions?

Tax-deductible super contributions are made from your after-tax income. This income may be from a variety of sources such as your take-home pay, savings, an inheritance or from the sale of assets.

Whatever the source, you can make a payment to your super fund from your bank account either as a one-off payment or a periodic direct debit.

 

Who can make tax-deductible super contributions?

There was a time when the only people who could claim a tax deduction for super contributions were self-employed (defined in super legislation as earning less than 10% of their income from salary or wages).

But thanks to changes in super legislation on 1 July 2017, more Australians are now able to make voluntarily tax-deductible, concessional super contributions.

If you are self-employed you can still make voluntarily tax-deductible, concessional super contributions, but now you’re also eligible if you:

  • Earn salary or wages as an employee
  • Earn investment income
  • Receive a government pension or allowance
  • Receive a partnership or trust distribution
  • Earn income from foreign sources
  • Earn superannuation income.

To be eligible to claim a tax deduction for your super contributions you must also:

  • Be aged under 75
  • Meet the work test if you’re aged between 65 and 74
  • Not use the contribution to help fund an existing super income stream or pension
  • Not be splitting the contribution with your spouse (married or de facto)
  • Not make the contribution to an untaxed super fund or a Commonwealth public sector defined benefit fund.

 

What do I need to do to claim a tax deduction on a super contribution?

If you’d like to benefit from a tax deduction on your personal after-tax super contributions, you’ll need to:

Make an after-tax contribution to your super

The amount you choose to contribute is up to you, but remember you cannot contribute more than $25,000 per year under the concessional contributions cap – or penalties will apply. If you’re an AMP super customer, you can set up notifications in My AMP to let you know when you’re nearing your limit.

Lodge a form with your super fund

You’ll need to lodge a notice of intent form with your super fund, which your super fund will acknowledge in writing.

Also note, you shouldn’t make any withdrawals or start drawing a pension from your super before your notice of intent form has been lodged with your super fund.

Are there other things that I should keep in mind?

 

How much can I claim?

If you’re claiming a tax deduction for an after-tax super contribution, the contribution will count towards your concessional contributions cap ($25,000 per year). If you exceed this, penalties will apply. 

From 1 July 2019, your concessional contribution cap may be higher than $25,000 if you’re eligible to use unused concessional contribution cap amounts that you have carried forward from previous years.

Unused concessional cap carry forward

 

Description 2017–18 2018–19 2019–20 2020–21 2021–22
General contributions cap $25,000 $25,000 $25,000 $25,000 $25,000
Total unused available cap accrued Not applicable $0 $22,000 $44,000 $69,000
Maximum cap available $25,000 $25,000 $47,000 $25,000 $94,000
Superannuation balance 30 June prior year Not applicable $480,000 $490,000 $505,000 $490,000
Concessional contributions nil $3,000 $3,000 nil nil
Unused concessional cap amount accrued in the relevant financial year $0 $22,000 $22,000 $25,000 $25,000

It’s also important to note that personal tax-deductible contributions are not the only contributions that count toward this cap. Other contributions include:

  1. Compulsory contributions paid by your employer under the Superannuation Guarantee
  2. Contributions from any other jobs you may have held in the same financial year
  3. Salary sacrifice contributions
  4. Notional taxed contributions if you’re a member of a defined benefit fund.

Do you think you are qualify for tax-deductible super contribution? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our specialists will be pleased to assist you.

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