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

Q: I work for myself but I also have a part-time job. I have been told that even though I receive SG from my part-time employer, I can also make tax-deductible super contributions. Is that true? And if it is true, how does it work?

Individuals who are self-employed, or who are not employed, are entitled to claim tax deductions for super contributions. An individual is also able to claim a tax deduction for super contributions if he receives part of his income as an employee, and satisfies the 10 per cent income test rule.

If you are substantially self-employed, or substantially not employed, but also an employee, you can claim a tax deduction for a super contribution when your income as an employee is less than 10 per cent of your total income.

The following text is fairly technical but important if this special exception applies to you.

Total income for the purposes of the 10 per cent rule is assessable income (gross income before tax deductions) plus salary sacrifice contributions (also known as reportable employer super contributions) plus reportable fringe benefits. You’re eligible to make tax-deductible super contributions when your employment income is less than 10% of your total income. Note that Superannuation Guarantee contributions do not count towards total income or employment income.

So, what then is assessable income?

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 (salary sacrifice contributions) are also added back to assessable income when working out whether an individual satisfies the 10% test.

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

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.

IMPORTANT: SuperGuide does not provide financial advice. SuperGuide does not answer all questions posted in the comments section. SuperGuide may use your question or comment, or use questions from several readers, as the basis for an article topic that we publish on the SuperGuide website. We will not disclose names or personal information in these articles. 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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