Claiming a Tax Deduction on Super Contributions

Did you know you might be able to claim a tax deduction if you’ve made a personal after-tax contribution to your super?

Whether you’re employed, self-employed, unemployed or retired, you might be eligible to claim a tax deduction on these contributions. This could mean you get something back when you complete your tax return.

Disclaimer This information is general in nature based on the current taxation laws. Whether it’s appropriate for you depends on your individual financial circumstances. We strongly recommend you seek professional advice before deciding to act on any information in this post.

What is an after-tax contribution?

After-tax super contributions are voluntary payments made into your super and don’t include compulsory superannuation guarantee or salary sacrifice contributions.

There are various ways to make an after-tax super contribution, including using money from your salary, savings, or the proceeds from an asset sale. These payments are called non-concessional contributions because you have already paid tax on the money.

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 voluntary tax-deductible, concessional super contributions.

Benefits of claiming a tax deduction on a super contribution

Claiming a tax deduction for your personal super contribution or standard member contribution may be beneficial for you.

Putting money into super and claiming it as a tax deduction may be beneficial if you receive extra income that would otherwise attract personal income tax (as this is often higher).

If you’ve sold an asset subject to capital gains tax, you may contribute some or all of that money and claim it as a deduction. This could reduce or even eliminate the capital gains tax owed.

Your contribution will be taxed in the fund at just 15% (or 30% for those earning over $250,000 p.a.). For most people, this will be lower than their marginal tax rate and they will pay less tax.

Your taxable income will be reduced by the amount you claim. This could result in you getting back some income tax that you’ve paid in that financial year when you lodge your tax return.

You can contribute when it suits you whether through regular payments or a one-off. You’ll need to be aware of some timings, but there’s flexibility around how and when you make a contribution.

How to claim a super contribution as a tax deduction

You need to lodge a form with your super fund called a Notice of Intent. Your super fund will acknowledge receipt.

Once the financial year ends, you can prepare and lodge your tax return using the written acknowledgement from your super fund.

You can find out more from the ATO here about how to claim tax deductions for personal contributions to a super fund.

Eligibility criteria

To claim a tax deduction, you’ll need to be:

Under age 75.
For people aged between 67 and 75, you will have to meet the work test.
Not use the contribution to help fund an existing super income stream or pension
Not make the contribution to an untaxed super fund or a Commonwealth public sector defined benefit fund.

If you do claim a tax deduction for your personal super contribution, you can’t also claim the government super co-contribution.

There are contribution limits. You can only claim a tax deduction on a contribution amount up to your concessional contributions cap. If you’re if you’re receiving super guarantee (SG) contributions from your employer or have a salary sacrifice arrangement in place, those contributions will also count towards your concessional cap. To determine how much extra you can contribute you should check this with your advisor.

There are also other eligibility criteria you must meet which you can read about here.

Balanced Beans Newcastle Accountants and Bookkeepers care about your financial future.

For more information or for any other bookkeeping, tax or payroll enquiries reach out to us online. Alternatively, contact us on (02) 4046 1000.

Servicing Newcastle, Lake Macquarie, Maitland & The Hunter Valley

(02) 4046 1000