Recent Super changes now make getting a tax deduction easier!
Prior to 1 July 2017 only those earning less than 10% of their income from employment (the ‘10% test’) were eligible to claim super contributions as a tax deduction. For everyone else the only way was to make salary sacrifice contributions. From 1 July 2017, all individuals under the age of 65 will be able to claim a tax deduction for personal super contributions (and those aged 65 to 74 who work more than 40 hours over 30 consecutive days in the financial year the contribution is being made).
This change will enable more people to be able to:
- make personal deductible contributions from your own cash flow or savings,
- make greater use of the contribution cap limits that apply to personal deductible and other concessionaly taxed super contributions, and
- reduce tax payable on other income such as investment income or capital gains.
Who might benefit from this strategy?
- if you are employed and receive superannuation guarantee contributions that are within the concessional contribution cap ($25,000), but your employer doesn’t offer salary sacrifice arrangements,
- you switch from being a self-employed contractor to an employee during the course of a year. Previously you would likely fail the 10% test due to employment income, and
- you are a resident for tax purposes who is working overseas for a foreign employer and your employer can’t or won’t contribute to an Australian super fund.
Of course, like anything to do with Super it can be complex and you need to get your strategy absolutely right to avoid the traps! In saying that, getting a tax deduction may not be the best approach for everyone. This is what we specialise in, so if you would like to check out what might work for you and your circumstances, just give us a call or return this email.