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Is it worth claiming a tax deduction on super contributions?


Is superannuation really the last refuge of tax-loop-holism? Well, allow a tax-loop-hologist to guide you through some of it. I could write a book on super and tax deductions, but a) it has been done b) you didn’t read it. So, here are just a few things worth knowing about this crazy maze of taxation delight. This is definitely not advice as it is not comprehensive or customised to your situation or anyone’s at all. You’ve been sufficiently warned I think, let’s dive in.



Super contributions and tax deductions:


If you have some extra cash and are interested in increasing your retirement savings, one effective strategy is to consider making tax-deductible super contributions. Many do this. Even more are thinking about it. This approach allows you to maximize the benefits of your investment. But it’s not a good idea to do it before talking to a financial adviser or at the very least your accountant. Many have gotten bitten in the bum too.


Is it all true then?


Indeed, it’s true. What part? By making additional contributions to your superannuation fund and claiming a tax deduction, you can enhance your retirement nest egg. However, it’s important to remember that when it comes to superannuation, there are specific regulations and limitations imposed by the government.


To begin with, you cannot seek a tax deduction for contributions made by your employer on your behalf. This includes the compulsory Super Guarantee contributions made by your employer. That also includes any additional reportable contributions. Such as those resulting from salary-sacrifice arrangements you might have in place.


Furthermore, deductions cannot be claimed for rollover payments received from other funds, including those originating from foreign funds.


So, what exactly do we mean by tax-deductible super contributions?


Tax-deductible super contributions are payments that you choose to make from your income after taxes, and for which you can claim a tax deduction. This income can come from various sources, including your net salary, personal savings, inheritance, or the proceeds from selling assets.


Opting to make a personal tax-deductible contribution can be an effective strategy to offset capital gains you may realize from investments held outside of your superannuation.


To execute this, you can transfer funds directly from your bank account to your superannuation fund, either as a one-time payment or through periodic direct debits.


It’s “super” (sorry, I couldn’t resist) important to note that these contributions count towards your concessional contributions cap. If you have any unused caps from previous financial years, you might even be able to contribute more by leveraging the carry-forward rule.


Definition: Concessional contributions are subject to taxation at the concessional super rate of 15% for individuals with incomes up to $250,000. For most people, this 15% rate is lower than the marginal tax rate they would pay on regular income. However, for those earning more than $250,000, there may be an additional 15% tax applied to some or all of their concessional contributions.



It’s essential to be cautious. Be “super” (Sorry!) careful. If you surpass your concessional contributions cap, you may incur additional taxes. Moreover, these excess contributions will also count towards your non-concessional contributions cap, unless you opt to withdraw the excess amount from your superannuation.


There was a period when only self-employed individuals, as defined in superannuation legislation (earning less than 10% of their income from salary or wages), could assert a tax deduction for their super contributions. However, as a result of changes in superannuation legislation on July 1, 2017, more Australians now have the option to make voluntary tax-deductible concessional contributions to their superannuation.


This option is still available to self-employed individuals, and it has been extended to include those who:


  1. Earn salary or wages as employees.
  2. Earn investment income.
  3. Receive a government pension or allowance.
  4. Receive distributions from partnerships or trusts.
  5. Earn income from foreign sources.
  6. Earn income from superannuation.


Salary sacrifice the bejezus out of it?


It’s important to note that if your employer does not offer salary sacrifice, or if you have savings outside of your superannuation that you’d like to contribute, you can choose to make a personal tax-deductible contribution instead. For employees, both salary sacrifice and personal tax-deductible contributions yield the same outcome.


However, there are eligibility requirements to consider before getting too excited. To qualify for a tax deduction on your voluntary super contributions, you must:


  1. Be under the age of 75.
  2. Satisfy the work test if you’re between the ages of 67 and 74.
  3. Not use the contribution to support an existing super income stream or pension.
  4. Not make the contribution to an untaxed super fund or a Commonwealth public sector defined benefit fund.


Government co-contribution


Keep in mind that if you claim a tax deduction for your personal super contribution, you cannot simultaneously claim the government super co-contribution. Important Note: Individuals with lower incomes may need to carefully evaluate which of these two contribution strategies is more advantageous for them. If you have a low marginal tax rate, making a tax-deductible super contribution might not provide any benefits, while the government co-contribution could significantly enhance your superannuation savings.


How to claim a tax deduction for a personal contribution to your superannuation?


To claim a tax deduction for your personal super contributions, you must first provide your superannuation fund with a completed ‘Notice of Intent to Claim or Vary a Deduction for Personal Super Contributions’ form (NAT 71121). This form can be obtained from the Australian Taxation Office (ATO) website or from your super fund.


When filling out the form, remember to:


  1. Submit it to your super fund either by the end of the financial year following the one in which you made the tax-deductible super contribution or by the date you file your tax return for that specific financial year, whichever comes first.
  2. Obtain written acknowledgment from your super fund before claiming the tax deduction on your tax return. This acknowledgment will confirm the eligible amount you can claim as a tax deduction.


Important to note: If you intend to split some or all of your contributions with your spouse while also aiming to claim a tax deduction for them, you must first submit the notice of intent to claim a deduction. Following this, you can then submit a Superannuation Contributions Splitting Application (NAT 15237) to your spouse.


It’s crucial to follow this sequence because, until your request to claim a deduction is processed, your contribution is categorized as a non-concessional amount, which cannot be split.


Tax efficiency


In conclusion, if you qualify for tax-deductible super contributions, it’s a worthwhile financial strategy. Not only will it enhance your retirement savings, but it’s also a tax-efficient approach. However, the appropriateness of this strategy depends on your unique financial situation. Your super fund can provide you with more information, and seeking independent financial advice may also be beneficial.


Please note that the information provided in this article is of a general nature. You definitely want to talk to your adviser etc before doing anything at all. I have seen this one backfire spectacularly – with long-lasting and disastrous consequences for all concerned and their loved ones too. Scary but potentially lucrative stuff.



If you are lost – If you need tax advice for your business, 


Contact us on 1800 672 670.