Generally speaking, you can make two types of super contributions: non-concessional (after-tax) contributions and concessional (before-tax) contributions. Concessional contributions can also include tax-deductible super contributions, where an individual claims a deduction.
For the 2014/2015 year, that is, from 1 July 2014 to 30 June 2015, an eligible individual can make concessional contributions of up to $30,000 a year if aged 48 years or under on 30 June 2014, and up to $35,000 for the year if aged 49 years or over on 30 June 2014. (For the general rules applicable to concessional contributions see SuperGuide article Super concessional contributions: 2014/2015 survival guide.
Am I eligible to make tax-deductible super contributions?
If you’re self-employed (or substantially self-employed) or you’re not employed, you can claim a tax deduction for your super contributions, which means these super contributions are treated as concessional contributions. An individual under the age of 18 however can only claim a tax deduction for super contributions when his or her income comes from gainful employment, such as carrying on a business.
If you’re an employee, in nearly all circumstances you cannot claim a tax deduction for making a super contribution, although you can get a similar tax benefit by making salary sacrifice contributions. If you’re an employee and you can satisfy the 10% income test rule (more on this later), then you may be able to claim a tax deduction for a super contribution, even as an employee.
The rules for claiming tax deductions on super contributions can be complex depending on the type of work that you do, and whether you hold down other jobs.
I have attempted to simplify the tax-deductibility rules into categories of individuals, but I suggest you also confirm your ability to claim a tax deduction with the Australian Taxation Office. Here goes: You can claim a tax deduction for super contributions if you fall into one of the following categories:
- Self-employed.You’re self-employed and you’re not working under a contract principally for your labour.
- Not employed. You’re not employed; for example, you’re a full-time investor or looking after children.
- 10% income test rule.You receive part of your income as an employee but less than 10% per cent of your assessable income plus salary sacrifice contributions plus reportable fringe benefits are attributable to employment as an employee. The 10% test sounds fairly complicated but if you’re employed, and also self-employed, then you can work out step-by-step work if you’re eligible to claim a tax deduction for your super contributions. Note that employment income includes reportable employer super contributions, such as salary sacrifice contributions, but 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 (such as salary sacrifice 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.
Note: Tax-deductible super contributions and other concessional contributions are subject to 15% tax within a super fund, which means that claiming a tax deduction for super contributions may not be tax effective if you pay less than 15 cents in the dollar tax on your income. Note that some self-employed individuals may be eligible for a refund of the 15% contributions ta paid on super contributions for the 2012/2013 year through to the 2016/2017 year (for more information see SuperGuide article Super tax refund for lower-income earners available until 2016/2017 year).
If you’re a high-income earner: If your adjusted taxable income is more than $300,000 a year, then your concessional contributions will be subject to an additional 15% tax, known as Division 293 tax. For more information on this extra tax, see SuperGuide article Double contributions tax for high-income earners.
Important: If you plan to claim a tax deduction for a super contribution, you must notify your super fund in writing before you lodge your tax return for the financial year, or by the end of the financial year following the year the contribution was made, whichever is earlier. You can find out more about the form that you must use to notify your super fund by checking out the SuperGuide article Concessional contributions: What form do I use to claim a tax deduction?