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What’s new with tax deductions for super contributions

May 21, 2018, 12:54 PM

By Graeme Colley

Graeme Colley SuperConcepts SMSF expert

Last year’s changes to super opened things up for anyone wishing to claim tax deductions for personal contributions. But you’ll need to make the contribution by 30 June if you’re going to make a claim.

The maximum amount of deductible super contributions that can be made for you without penalty is limited to $25,000. This includes amounts your employer makes to super including super guarantee and salary sacrifice contributions, as well as super contributions that you have claimed as a tax deduction.

If you want to make a deductible contribution, the first thing to do is to make a personal contribution to super by 30 June 2018. For SMSFs it’s probably just a matter of transferring the money to the fund’s bank account. If you’re in a professionally managed super fund, to find out how to make the contribution, contact them or have a look at their website.

The next thing to do is make an election to claim the deduction. This should be done by the earlier of the time your tax return is lodged with the ATO, or the end of the next financial year (30 June 2019 for contributions you have made for the 2017/18 financial year), otherwise you won’t be able to make a claim.

Also, you won’t be eligible for a tax deduction if your election is received by the fund after you have commenced a pension with the relevant contribution, or you have withdrawn/rolled over your super from the fund that received your contribution. This shows you how important timing is to make the election and claim the deduction.

There are a few options available to make the election. For SMSFs, simply write a letter to the trustee(s) stating your intention, or use the official ATO form available on their website. Otherwise, if you’re with a professionally managed super fund, it may have a form of its own.

After you have sent the election to the fund, the trustee is required to acknowledge receipt of your election. That’s the signal you can now claim a tax deduction for the contribution in your election.

But, what happens if you have claimed too much? If you haven’t lodged a tax return or done any of the things which will render your election as invalid, it is possible for you to send an amended election to your fund notifying them of a decrease in the amount claimed in your election. However, if you are not able to do this then you may end up being liable for excess concessional contributions tax, which taxes the excess at your personal tax rate plus an interest rate penalty.

So, if you intend to make a tax deduction for super contributions you better get into action and make the contribution to your fund by 30 June, which is not that far away. After that you will have some time to make the election for your claim, but you need to know the rules if you are intending to rollover to another fund or start a pension or delay sending your tax return to the ATO. Then there’s the amount you are going to claim – make sure all the deductible contributions that are made to your super are no more than $25,000.