New opportunities & guidelines for personal super contributions

Over the past year, the rules about claiming contributions to a superannuation fund have changed. Previously, if an employer made a contribution to your super fund on your behalf, you couldn’t claim deductions for any personal contributions unless you met ‘the 10% rule’.

However, from the 2018 income tax year, employees can claim a tax deduction for personal superannuation contributions. This means that even if you have ‘employer support’ you can claim additional superannuation contributions up to the $25,000 cap.

Thanks to this change, most people under the age of 65 will now be able to claim a tax deduction for any personal super contributions made regardless of their employment status. (If you’re between the ages of 65 – 74, you can also claim a deduction if a work test is met.)

Why make additional super contributions?

Making an additional super contribution may decrease your taxable income and therefore your tax liability, for the entire year. Personal contributions to a complying super fund are only taxed at 15% (when you claim a deduction), so you’ll potentially get a tax benefit something similar to that of salary sacrificing.

This new change may be especially helpful to you if:

  • You get a bonus and want to save the money
  • You don’t have the option to salary sacrifice
  • You have a one-time capital gain (for instance, through the sale of property or an investment or property).

Remember, however, if you make a personal contribution, the money must remain in your superannuation account, because in most cases you can’t access those funds until retirement.

How to make a personal contribution to your super fund

If you want to make a contribution to your super (using after-tax dollars) and benefit from a tax deduction, here’s what you need to do:

  1. Make a personal contribution to your fund by 30 June of the relevant tax year. The amount is up to you, as long as the total – including any contribution made by your employer – does not exceed the contributions cap of $25,000 for the year.
  2. Lodge an intent to claim form with your super fund, which will then be acknowledged in writing. In most instances, this will be sent directly to you by your super fund.
  3. Use the written acknowledgement from the fund to prepare and lodge your tax return. If the Accru team or another accounting firm is assisting you with your tax affairs, make sure you provide a signed copy of your intent to claim form when you send in your information. Doing so is essential in completing your return correctly and claiming a valid tax deduction.

If this is the first time you’ve made a personal contribution or taken advantage of the new rule, be sure to notify your accountant so you don’t miss out on important tax benefits.

Have any questions about making super contributions or claiming a deduction? Contact the Accru team today.

About the Author
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Sam Facy
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