Making an additional super contribution: new rules and steps

Last year, the rules about claiming superannuation contributions changed. Previously, where an employer made a superannuation contribution to your super fund on your behalf you could not claim a tax deduction for any personal super contributions unless you met “the 10% rule”.

Now for the first time (2018 income tax year), employees are able to claim a tax deduction for personal super contributions, which means that even if you have “employer support” you can claim additional member contributions up to the limit of $25,000.

With this change, most people under 65 will be able to claim a tax deduction for personal super contributions. The deduction is also available for those aged 65 – 74 provided a work test is met.

Why make an additional contribution?

Making an additional contribution could reduce your taxable income, and therefore your personal income tax liability, for the year. Because personal contributions to a super fund are only taxed at 15% (where you claim a deduction), you’ll get a similar tax benefit to that of salary sacrificing.

This change could especially benefit you if your employer doesn’t give you an option to salary sacrifice, if you receive a bonus, or if you have a one-time capital gain (eg. the sale of an investment).

However, keep in mind that if you make a contribution, you have to keep that money in your super because you’re generally not able to access those funds until retirement.

Steps to take

If you have made a contribution to super from after tax money and you want to benefit from a tax deduction on personal super contributions, here are the steps you’ll need to take (in the following order):

  1. Make a personal contribution to your super by the end of the relevant income tax year (30 June). The amount is up to you, as long as the total amount contributed to super (by you and your employer) doesn’t exceed the contributions cap (ie $25,000).
  2. Lodge an intent to claim form with your super fund, which your fund will then acknowledge in writing. In most cases this will be sent to you by your super fund.
  3. Using the written acknowledgement from your super fund, prepare and lodge your personal tax return. If you’re working with the Accru Harris Orchard team or with any professional accounting firm on your taxes, be sure you provide a signed copy of your intent to claim form when you send in your information. This is vital in order to complete your tax return and have a valid tax deduction.

If you have never made a personal super contribution before and you are taking advantage of the new rules, be sure your accountant knows you have contributed additional super, otherwise you may miss out on tax benefits.

Have questions about super contributions or claiming a contribution as a deduction? Contact us today.

The information contained in this article is based on information believed to be accurate and reliable at the time of publication. To the extent permissible by law, neither we nor any of our related entities, employees, or directors gives any representation or warranty as to the reliability, accuracy or completeness of the information; or accepts any responsibility for any person acting, or refraining from acting, on the basis of information contained in this blog. This information is of a general nature only. It is not intended as personal advice and does not take into account the particular investment objectives, financial situation and needs of a particular investor. Before making an investment decision you should speak with your financial planner to assess whether the advice is appropriate to your particular investment objectives, financial situation and needs.

About the Author

Sam Facy
Sam was always good with numbers: he even won the inaugural accounting prize at school. Adelaide being Adelaide, his father knew someone, which meant a part-time accounting job at an early age.

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