Tax-deductible super contributions: Meeting the 10% income test

Q: Since July 2009, salary sacrificed super contributions have counted towards the co-contribution income test. Was there a similar change made in relation to the income test that applies to concessional contributions when claiming tax-deductible contributions? My understanding is that the income test applicable for making tax deductible (member) contributions is that the member’s assessable income plus reportable fringe benefits from eligible employment must be less than 10% of their total assessable income from all sources. Is that still the case?

The 10% income test (also known as ‘maximum earnings as an employee’) has changed, and this change took effective from July 2009.

An individual is able to claim a tax deduction for super contributions if he receives part of his income as an employee but less than 10% per cent of his assessable income and reportable fringe benefits plus reportable employer super contributions are attributable to employment as an employee. Note that employment income includes reportable employer super contributions (RESC), such as salary sacrifice contributions, but RESC doesn’t include Superannuation Guarantee contributions.

Assessable income is gross income before any deductions are allowed, and includes salary and wages, dividends, interest distributions from partnerships or trusts, business income (including personal services income), rent, foreign source income, net capital gains and a few other items. Reportable employer super contributions are also added back to assessable income when working out whether an individual satisfies the 10% test – the employment income divided by total income must be less than 10% for an individual to claim a tax deduction for his or her own super contributions.

I explain the rules for tax-deductible super contributions in more detail in the SuperGuide article Who can make tax-deductible contributions?

I suggest you chat to a registered tax agent, typically an accountant to determine the best strategy for your circumstances.

Background: Quoting directly from the ATO website:

You are eligible to claim a deduction if:

  • you satisfy the ‘maximum earnings as an employee’ condition
  • you meet the age-related conditions
  • you made personal contributions to a complying super fund or a retirement savings account (RSA)
  • you made the contributions in order to obtain super benefits for yourself, or for your dependants in the event of your death
  • you have written to your super fund or RSA provider, in the approved form Deduction for personal super contributions (NAT 71121, PDF 188KB), and advised them of the amount you intend to claim as a deduction
  • your super fund or RSA provider has acknowledged your notice of intent and agreed to the amount you intend to claim as a deduction. [end of extract]

Note: If you are 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 28th day 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.
© Copyright Trish Power 2009-2014

Copyright for this article belongs to Trish Power, and cannot be reproduced without express and specific consent.


IMPORTANT: SuperGuide does not provide financial advice. Comments provided by readers that may include information relating to tax, superannuation or other rules cannot be relied upon as advice. SuperGuide does not verify the information provided within comments from readers. Readers need to seek independent advice about their personal circumstances.

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