Personal Superannuation Contributions

Members of a superannuation fund that are self-employed or earn passive income (i.e. from investments or trust distributions) are able to claim a tax deduction for making personal contributions so long as they meet the conditions below:

  • Contributions must be made to a complying superannuation fund specifically for the provision of superannuation benefits for the contributor or their dependents;
  • Contributions are subject to the standard contributions caps
  • Contributions are subject to specific notice requirements, in an approved form. This form is provided by the ATO(NAT71121). We still see Accountants using forms prepared internally which don’t include all the required information.
  • Any “employment” income (for SGC purposes) must be less than 10% of total assessable income (this is the 10% Rule)
  • Aged based restrictions are still applicable

Q: What are the notice requirements and why are they important? What is a valid notice?

A: To be entitled to the tax deduction, the contributor must give valid notice to the Fund’s Trustee/s (often the same person) that they intend taking a tax deduction for the contribution. This informs the Trustee/s to treat the contribution as a taxable contribution in the Fund as though it was a normal employer contribution, taxed n at 15%.

If the contributor is within the income threshold for claiming a Government co-contribution and also satisfied the 10% Rule to claim a personal contribution deduction, the notice for the personal contribution deduction must exclude that part of the contribution for which they were claiming a Government co-contribution.

The personal contribution notice is also important as the contribution is included in the concessional contribution cap. If the contribution is not included or the notice is not valid, the contribution will form part of the non-concessional contributions cap for excess purposes.

The notice must be given to the Trustee/s as soon as you lodge your tax return containing your deduction or by the end of the financial year following the financial year in which the deductible contribution was made (whichever is earlier).

This can be a complex area. During the course of our audits, we often come across incorrect treatments, no valid notice, no trustee acknowledgement or a lack of understanding of the strict requirements relating to personal deductible contributions.

Tips:

  • Ensure that the contributor does not deduct an amount that is greater than the contribution stated in the notice
  • If the taxation deduction is disallowed, the contribution will be treated as a non-concessional contribution. Watch the caps!
  • Importantly, the Trustee is required to acknowledge receipt of the notice within 30 days of receiving it.