Personal Super Contributions Tax Deduction: Your Complete Guide

A tax deduction is available for personal super contributions each year up to a certain limit. However, to be eligible to claim a tax deduction on personal super contributions, you need to follow some specific steps and be aware of the risks.

What Are Personal Super Contributions Tax Deductions?

A personal super contribution is a contribution that you make into superannuation from your personal bank account. Once the contribution is made, you will have the option of claiming it as a tax deduction. If you do claim it as a tax deduction, the contribution will be recorded as a concessional contribution. If you do not, it will be recorded as a non-concessional contribution.

You may decide to claim all or some of the contribution as a tax deduction.

The amount of the personal contribution that you claim as a tax deduction will provide you with a personal tax deduction equal to the contribution amount. This tax deduction will reduce your personal taxable income and subsequently reduce your personal income tax obligations.

However, there is a limit on the amount of personal contributions that can be claimed as a tax deduction.

How Much Can I Claim as a Tax Deduction?

Remember how I said that the portion of the personal contribution that you claim as a tax deduction will be recorded as a concessional contribution? Well, the concessional contribution cap is $27,500 per person, per financial year. And, other types of contributions that count towards that same cap include employer superannuation guarantee (SG) contributions and salary sacrifice contributions; so, you need to be sure to include those in the same cap.

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The concessional contribution cap is the maximum amount that can be contributed into super by you each financial year as a concessional contribution. This applies across all of your super accounts. That is, you do not get a separate $27,500 cap for each super account you have. The cap is calculated on a per-person basis.

However, any unused portions of your concessional contribution cap from previous financial years (beginning 2018/19) are automatically carried forward for you each year, allowing you to potentially contribute more than $27,500 as a concessional contribution in any one year. But, you can only utilise the carried forward amounts (or part thereof), if you had a total super balance below $500,000 on 30 June of the previous financial year.

Claiming Personal Super Contributions (Step-by-Step)

The process of claiming a tax deduction for personal super contributions is an important one. Follow these steps to help ensure it is executed correctly:

  1. Contact your financial adviser or accountant to calculate how much you should contribute to super and claim a tax deduction for.
  2. Once you have made the personal contribution, you will need to inform your super fund of your intention to claim a tax deduction for that contribution by completing the required form. The form can be found on your super fund’s website. Otherwise, the ATO provides one here.
  3. Shortly after you have submitted your intent to claim a tax deduction, your super fund will acknowledge your intention to claim a tax deduction for the personal contribution.
  4. Only once each of these steps has been completed will you be eligible to then claim a personal tax deduction on your individual tax return for the contributions made.

Importantly, you need to submit the form of your intention to claim a tax deduction and receive acknowledgement from your super fund before:

  • Completing your individual tax return for the relevant year;
  • Transferring your super to a different super fund;
  • Using all or some of your super to start an income stream;
  • Withdrawing some or all of your super balance; and
  • At the end of the financial year after the year, the contribution was made.

Tax on Personal Super Contributions

If you are intending on claiming a tax deduction for personal super contributions, these contributions will incur a contributions tax.

Contributions tax is payable on all concessional contributions and is deducted from the contribution amount – the net contribution is then allocated into your member account.

The contributions tax rate is a flat 15% on all concessional contributions. An additional 15% contributions tax, known as Division 293 tax, is payable by individuals with an income of more than $250,000 per year.

The Risks of Claiming Personal Super Contributions

Here are a few of the risks and disadvantages of claiming a tax deduction on personal super contributions:

Contributions Tax

Contributions tax is payable on all concessional contributions. Therefore, if you claim a tax deduction on your personal contributions, you will pay contributions tax. For a personal concessional contribution to be beneficial, you should ensure that the contributions tax payable will be lower than the personal income tax that would otherwise be payable if you hadn’t claimed a tax deduction for the contribution.

Failure to Lodge Intention to Claim Deduction

If you fail to lodge your intention to claim a tax deduction with your super fund, or do so when it’s already too late (see process above), you will be unable to claim a tax deduction for your personal super contributions, which can result in higher personal income tax and could cause you to exceed the non-concessional contribution cap.

Increasing the Taxable Component

By claiming personal super contributions, you are classifying the contribution as a concessional contribution. A concessional contribution effectively counts towards the taxable component of your superannuation balance. The downside of having taxable components is that this portion may incur tax if withdrawn from super while under age 60 and will incur death benefits tax if paid to a non-tax dependant (e.g. adult child) in the event of your death.

Should I Claim a Personal Super Contribution Deduction?

Claiming a tax deduction for personal super contributions can be beneficial if you:

  • Have sufficient contribution caps available to do so;
  • Are confident the contributions tax that payable will be lower than your personal tax rate;
  • Before making any contribution – are confident you won’t require the funds before retirement; and
  • Have spoken to your financial planner or accountant and confirmed the personal contribution amount is appropriate, given your situation.

Ultimately, optimising your personal super contribution strategy can provide significant tax benefits and provide you with more funds for retirement. We specialise solely in helping people aged 55 – 70 plan their retirement. Whether you’re 10 years from retirement, 5 years, or ready to resign tomorrow, we’re here to help. Click here to check out our advice process here.

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