A new superannuation contribution opportunity was introduced this financial year which means that if you haven’t maximised your concessional contribution cap of $25,000, it’s not too late!
This is the first financial year in which individuals will be eligible to make a personal superannuation contribution and claim that contribution as a personal tax deduction, regardless of their work status. In the past as a general rule you had to be self-employed or have no employment income to be able to claim this deduction, but the removal of the employment income test has opened up the opportunity to all.
Example:Billy Bloggs works full time and, through a combination of salary sacrifice and his employer’s 9.5% Superannuation Guarantee, a total of $20,000 has been contributed to his superannuation account on his behalf. Billy can draw $5,000 from his bank account, contribute it to his superannuation account and claim it as a tax deduction. As a tax deductible superannuation contribution, 15% contributions tax will be deducted.
So if you haven’t already maximised your concessional contribution cap of $25,000 for the financial year through salary sacrifice, you have an opportunity to contribute personal funds to superannuation in the lead up to 30 June and claim as a tax deduction.
A few things to keep in mind:
- you need to be eligible to contribute to superannuation, that is, under age 65 or, if you are between 65 and 75, you need to have been gainfully employed for 40 hours in a consecutive 30 day period this financial year;
- the maximum you can contribute to superannuation is $25,000 this financial year and this will include any salary sacrifice and employer superannuation guarantee contributions;
- you have to be able to use the tax deduction. That is, you need to ensure that the personal tax you would otherwise have to pay is greater than the 15% contributions tax you will incur on your superannuation contribution, and
- you must lodge a ‘Notice of Intent to Claim’ form with your superannuation fund to claim the tax deduction on the contribution before you lodge your personal tax return.
Please keep in mind that in order to be treated as a contribution for the current financial year, it is important that the contribution is received by the superannuation fund before 30 June.
Bank transfers can often take 3 days to process between banks – about the same time it took Apollo 11 to get to the moon in 1969. It is only once the funds are cleared on the third day that the contribution is deemed to be received. Therefore, as June 30 falls on a Saturday this financial year, we recommend that bank transfers are done by Monday 25thJune, unless your bank is able to facilitate a same day transfer.
These are all matters that your ARA adviser can assist you with if you are interested in topping up your contributions for the financial year, so please feel free to contact them.