Tax-effective Super contributions

About the author:

Author name:

By Terri Bradford

Job title:

Head of Wealth Management

Date posted:

17 July 2017, 8:13 AM

One of the legislated superannuation reforms which took effect from 1 July (2017) is the removal of the 'maximum earnings as an employee' test which defined who could contribute to super to claim a tax deduction.

Now, anyone eligible to contribute to super can claim a tax deduction as long as their income is enough to support the deduction. It no longer matters whether you are an employee or self-employed, if you are able to contribute to super then you may also be able to claim a tax deduction on that contribution.

The newly reduced concessional (deductible) contribution limit of $25,000 must also be considered.

Some individuals may find the ability to claim a tax deduction at the end of the year, rather than entering a structured salary sacrifice arrangement throughout the year more appropriate.

While salary sacrifice arrangements will continue to be a popular strategy for many, for those individuals who have concerns about future cashflow or those who may receive ad-hoc bonus payments, being able to control when and how much to contribute to super and still receive a tax benefit may be a more favourable strategy.

In summary

• The 'maximum earnings as an employee' condition was removed from 1 July 2017 as part of the superannuation reforms (also known as the 'eligible person test' or, more commonly, the '10% rule').
• Any individual eligible to contribute to superannuation may be able to claim a tax deduction on the contribution from 1 July 2017 depending on their taxable income position.
• 'Eligible to contribute' includes a person over age 65 and under age 75 who can meet the 40 hour work test (i.e. 40 hours over 30 consecutive days).
• Employees whose employers do not provide for salary sacrifice arrangements may now be able to make tax-deductible contributions instead.
• Super guarantee contributions (9.5%) count against the concessional contribution limit, which will be $25,000 from 1 July 2017. Employees need to take this into account when determining what amount to contribute personally to claim a tax deduction.
• A notice of intent to claim a tax deduction must be provided when making personal deductible contributions.

More information

If you would like to know more about how you can build retirement savings tax-effectively speak to your Morgans Adviser or contact your nearest Morgans office.