A raft of government changes to Superannuation means that you might need to take action before lodging your tax return, if you plan to make voluntary super contributions.
You can now claim a tax deduction for personal concessional contributions, even if your employer contributes for you (or you as Director contributes). The ATO says that most people between 18 and 75 years are eligible to claim a tax deduction for personal super contributions - including 65 to 74 year olds who meet the work test.
We all want to see our super grow over time. There are two main ways to increase your personal super payments, and which way you choose will depend on your work situation and income.
If you are employed, your employer can agree to pay a portion of your pre-tax salary as an extra 'concessional' contribution to super (a salary sacrifice). This can be tax-effective if you earn more than $37,000 a year.
>>> A concessional contribution is a payment put into your super fund from your pre-tax income. A concessional contribution is taxed at 15% when received by the Super fund. These are capped at $25,000 per year, including employer contributions. >>>
The other way is to simply deposit some money into your super. These are called after-tax super contributions or non-concessional contributions. You can make $100,000 in non-concessional amounts per financial year. It can be done through setting up a BPay monthly or quarterly payment, if you like automatic saving.
<<< A non-concessional contribution means it won't be taxed on entry to your super fund because that income was already taxed >>>
Super Co-contribution Instead
If you earn less than $51,813 per year (before tax) and make after-tax super contributions, you are eligible for co-contributions from the government. Those earning less than $36,813 will receive a max of $500 per year as a government payment. Once you lodge your tax return, it will all happen automatically, providing the personal contributions showed up correctly in your super account. Thus you folk won't need to claim the tax deduction.
We advise to take some professional tax advice before making personal super contributions that you want to claim a tax deduction on, however, following is a rough guideline.
How to Lodge your Intent to Claim a Deduction
If you receive any major type of income, and you want to make contributions to super AND get a superannuation contribution deduction, follow this guide:
- Make personal (after tax) super contributions directly to your super fund before 30 June 2018, if you haven't already contributed this financial year.
- Give your fund a Notice of intent to claim or vary a deduction for personal super contributions
- Obtain the letter of acknowledgement from your super fund of their notice of intent - before your accountant lodges the 2018 tax return.
Intent to claim or vary a deduction for personal super payments can become complicated if you contribute to one particular super fund and then change your super fund before lodging the claim. So be sure to get the claim done before you make the change, for simplicity's sake.