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Home / How super works / Employers guide to super / Claiming a tax deduction for your employees’ super: What are the rules?

Claiming a tax deduction for your employees’ super: What are the rules?

November 13, 2020 by Janine Mace Leave a Comment

Reading time: 3 minutes

On this page

  • Which super contribution payments can I claim a deduction for?
  • Quarterly payment due dates for SG payments
  • When are contributions considered paid?
  • Contributions you can’t claim as a tax deduction

Paying super contribution on behalf of your employees can seem hard when money is tight.

But it’s important to remember there is a valuable benefit at the end of it – you get to claim a tax deduction for your contributions.

Here’s a simple guide to what you can and can’t claim when it comes to super contributions.

Which super contribution payments can I claim a deduction for?

Under current super law, you can claim a tax deduction for the following super contributions you make on behalf of your eligible employees:

  • Super Guarantee (SG) contributions paid by the quarterly due date to an employee’s nominated super fund.
  • Mandatory contributions under an industrial award or determination, or a notional agreement preserving a state award.
  • Non-mandatory employer contributions (if paid within 28 days of the end of the month in which your employee turns 75 years old).
  • Contributions made under an effective salary sacrifice arrangement.

SG Charge (SGC) pre-payments made for a future super contribution obligation in a later quarter.

For more information, read SuperGuide article Super Guarantee Charge for employers: What is it and what are my options?


Super tip

To qualify for a tax deduction, your SG contribution payments for your employees must be made to your employees’ nominated super funds by the quarterly due dates for SG contributions.


Quarterly payment due dates for SG payments

QuarterPeriodSG contribution due date
11 July – 30 September28 October
21 October – 31 December28 January
31 January – 31 March28 April
41 April – 30 June28 July

*When a due date falls on a weekend or public holiday, you can make payment on the next working day


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For more information, read SuperGuide Your simple guide to Superannuation Guarantee (SG) contributions.


When are contributions considered paid?

If you use a clearing house to distribute SG contributions to your employees’ various super funds, your contributions are considered to be paid on the date the super fund receives it – not the date the clearing house receives it from you.


Super tip

Check with your clearing house when it processes payments to ensure you leave enough time for the clearing house to pass on your payments to the super fund before the quarterly due date.


In order to claim a tax deduction for a salary sacrifice contribution, the payment must be received by your employee’s super fund in the same financial year as you want to make the claim.

If the salary sacrifice contribution payment for the fourth quarter is not received by the super fund until after 30 June, you are not able to claim a deduction until the following financial year.


Case study

Each month, Jayson pays salary sacrifice contributions of $1,200 for his employee, Yani, into her super fund.

Jayson ensures the contributions are always paid by the 28th day after the month to which the salary sacrifice contributions relate. For example, he pays the August salary sacrifice contribution by 28 September.

At the end of the 2020/21 financial year, Jayson can claim a tax deduction of $13,200 for the 11 monthly contributions he paid during the financial year.

As the contribution for June 2020 was paid to Yani’s super fund on 28 July 2020, the tax deduction for this contribution cannot be claimed in 2020/21 but Jayson can claim a deduction for it in 2021/22.


Warning

If you use the Small Business Superannuation Clearing House (SBSCH) and plan to claim a tax deduction for SG payments or salary sacrifice contributions for your employees, payments made via the SBSCH are considered to be received in the income year the super fund receives the payment – not the SBSCH.

For example, to ensure you can claim a deduction for employees’ super contributions you make during the 2020/21 financial year, you need to allow sufficient processing time for your super payments to be received by your employees’ super funds prior to 30 June 2021. The processing time for the SBSCH is normally around 7 days.


Contributions you can’t claim as a tax deduction

There are some important exceptions to the tax deductibility of super payments you make for your employees:

1. Super Guarantee Charge payments

If you don’t make your SG contributions by the quarterly due date – or do not pay the full amount – you may be required to pay the Super Guarantee Charge (SGC). This payment is ineligible for a tax deduction.

The SGC consists of the SG shortfall amount, interest and an administration fee – none of which are tax deductible.

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For more information, read SuperGuide article Super Guarantee Charge for employers: What is it and what are my options?

2. Employee spouse payments

Contributions made on behalf of an employee’s spouse are not tax deductible.

These contributions are considered a taxable fringe benefit and you will need to pay Fringe Benefits Tax (FBT) on them. They must also be included on your employee’s annual payment summary as a reportable fringe benefit.

For more information, read SuperGuide articles:

  • Contribution splitting: How to boost your spouse’s super
  • How to make super contributions after you’ve retired

3. Late contributions for employees aged 75 and over

If you make super contributions for an employee aged 75 and over they must be paid by the quarterly due date if you plan to claim a tax deduction for them.

When making a non-mandatory employer contribution on behalf of an older employee, if you pay the contribution later than 28 days after the end of the month in which your employee turns 75, your payment will not be tax deductible.

4. Ineffective salary sacrifice arrangements

To claim a tax deduction for salary sacrifice contributions, your arrangement with your employee must be considered an effective salary sacrifice arrangement.This means thearrangement must be entered into before the employee performs the work, a documented agreement with your employee is in place and the sacrificed salary must be permanently waived.

If the ATO considered the arrangement ineffective, the contributions will be considered a payment of salary and wages and a personal – rather than an employer – contribution. This means you will not be entitled to a tax deduction for the sacrificed amount and you may have underpaid your SG contributions, making you liable for the SGC.

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For more information, read SuperGuide article Salary sacrifice and super: How does it work?

5. Contributions to a non-complying super fund

An employee’s salary sacrifice super contributions must be made to a complying super fund or they will be considered a fringe benefit and you will be unable to claim a tax deduction for them.

The amounts will also be subject to FBT and must be recorded on your employee’s payment summary as a reportable fringe benefit.


Good to know: SG amnesty for employers

To encourage employers to get their super affairs in order, the Morrison government introduced a one-off SG amnesty in 2020. The amnesty provided an opportunity for employers to correct past SG non-compliance without having to pay a penalty.

The six-month amnesty ran until 7 September 2020 and permitted employers to disclose and pay missing SG contributions for their employees for any quarter from 1 July 1992 to 31 March 2018.

Employers taking advantage of the amnesty did not pay the normal interest, administration charges and non-payment penalties of up to 200%. They were also able to claim a tax deduction for any outstanding SG payments made by 7 September 2020.

Payments made under the amnesty arrangement made after 7 September 2020 are not tax deductible.


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Learn more about employer super responsibilities in the following SuperGuide articles:

Quiz: Employer super responsibilities

December 1, 2020

Employee or contractor for super purposes? How to tell the difference

November 13, 2020

How to create an effective salary sacrifice arrangement with your employees

November 13, 2020

Employee super contributions for the self-employed and micro businesses

November 13, 2020

Checklist for employers: 7 tips to help you master your super responsibilities

November 13, 2020

Employer’s guide to Superannuation Guarantee (SG) contributions: Which employees are eligible?

November 13, 2020

Choosing a default fund for your employees

November 13, 2020

Calculating your employees’ SG contributions? The rules to help get it right

November 13, 2020

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