Personal Deductible Super Contributions Tips and Traps – Part 1

Posted on 18 February 2019

Claiming personal tax deductions for personal super contributions is a valuable opportunity, if you don’t get caught out by any of the common traps.

For personal super contributions made on or after 1 July 2017, clients no longer have to earn less than 10% of their income from employment to be eligible to claim a tax deduction. This opens up the opportunity to claim a tax deduction to any person:

• Under the age of 75
• Is eligible to contribute to super, and
• Has room left on their concessional contributions cap
• Has enough assessable income to be able to use the tax deduction

Claiming a tax deduction for personal super contributions may allow people to reduce their taxable income as well as a provide a tax effective way to:

• Fund insurance through super
• Contribute to super where salary sacrifice is not available
• Save for a first home deposit
• Make in-specie contributions of direct shares into SMSF’s

To be eligible to claim a tax deduction for a personal super contribution you need to be:

• Under age 75
• Make a personal contribution to a complying super fund
• Submit a valid Notice of Intent to claim form within the required timeframes
• Receive an acknowledgement from the trustee that the valid notice of intent has been received and processed before claiming the deduction
• Claim a deduction in your tax return for an amount that does not exceed the amount stated in the notice of intent to claim form and does not exceed your assessable income less all other deductions

You cannot claim a deduction for:

• A downsizer contribution
• A CGT exempt amount contributed to super as required under the small business retirement exemption
• Made to a Commonwealth public sector superannuation scheme in which you have a defined benefit interest
• Made to an untaxed fund
• Made by a minor unless the minor derives income from employment or carrying on a business

This month we will look at the Traps and next month we will look at the tips!

Traps:

1. You need to ensure that your total concessional contributions i.e. employer and personal do not exceed the contribution cap – currently $25,000 pa
2. Ensure contribution made is classified correctly i.e. personal contribution and not employer contribution, otherwise the ATO will count the contribution twice.
3. You cannot make a contribution and claim a tax deduction for that contribution if that contribution is already being counted as either a spouse tax offset or a non-concessional contribution required to claim the government co-contribution
4. Submitting a notice of intent too late – must be submitted either by the end of the day that the tax return is lodged or the end of the next income year following the year of contribution, whichever is earliest
5. Claiming an incorrect amount on the tax return – needs to match the notice of intent
6. Need to have assessable income above the tax-free threshold otherwise there is no benefit
7. Clients with total super balances greater than $1.6M