Calculator-and-Pen, Walker Wayland

Jun 2018 3 Minutes

Employees can now make tax-deductible super contributions

We provide you with a number of options to help improve your business' performance and make it as successful as it can be. Since 1 July 2017 an employee making superannuation contributions can generally take advantage of the concessional (before-tax) contributions rules. This can be either by salary sacrificing, or by making tax-deductible member super contributions. If you’re self-employed, you can take advantage of the concessional contributions rules by making tax-deductible super contributions.

Making voluntary concessional contributions to a super fund is now less complicated if you are faced with one of the following situations:

  • you work for an employer who won’t let you salary sacrifice super contributions, or
  • you work for an employer who reduces your Superannuation Guarantee (SG) entitlement when you salary sacrifice (that is your SG contributions are based on the reduced salary level), or
  • your work arrangements include both work as an employee, and work as a self-employed person.

Before July 2017, if you worked for an employer who wouldn’t agree to redirect some of your before-tax wages or salary to a super fund, then you could not make voluntary concessional contributions. Since 1 July 2017, an employee can consider making tax-deductible super contributions if an employer is not willing to set up a salary sacrifice arrangement.

Alternatively, you may work for an employer who reduces your salary for the purposes of calculating Superannuation Guarantee contributions, when you opt to commence a salary sacrifice arrangement, effectively receiving fewer super entitlements. Before July 2017, you either had to accept this unfair (but legal) behaviour, or not salary sacrifice. Since 1 July 2017, instead of salary sacrificing super contributions and your employer reducing the amount of salary on which he or she bases your SG contributions, you can now make tax-deductible super contributions and retain your salary level and your expected SG entitlements.

Another possible scenario is where you are a part-time employee who is also self-employed. You may be receiving Superannuation Guarantee contributions for your work as an employee, which, before July 2017, may have precluded the opportunity to make tax-deductible super contributions (because you were receiving employer super support). Since 1 July 2017, your employment status is irrelevant for making tax-deductible super contributions.

To avoid excess contributions tax, you must ensure that your total concessional contributions do not exceed the $25,000 cap.

If you’re under, or over, a certain age, you may not be able to make super contributions, or make tax-deductible super contributions:

  • If you are nearing 75 years of age, and you wish to claim a tax deduction for super contributions, note that any super contribution must be made before the 28thday of the month following the month that you turn 75. Apart from this specific situation, individuals aged 75 or over cannot make super contributions.
  • If you are under 18 years of age at the end of the financial year in which you made a super contribution, then you can only claim a tax deduction for that super contribution if you earned income as an employee or by running a business during that same financial year.

Before you can claim a tax deduction then you must advise your super fund by submitting a ‘valid notice of intention to deduct’ and you must also have received acknowledgement of receipt of this notice from the super fund.

We suggest you discuss the best tax strategy for your circumstances with your accountant here at Walker Wayland. For any specific financial advice relating to super contributions please contact your licenced financial advisor. If you do not have a financial advisor, we can put you in touch with one of our preferred alliance partners.