Tax deductible super contributions

Super contributions aren't just about saving for your future – they can also help reduce your tax now! That's right, some super contributions are tax deductible, meaning you can lower your taxable income while boosting your retirement savings. Let's dive into how this works, what you can claim, and how to maximise those tax benefits.

Concessional Contribution Cap

The concessional contribution cap is $30,000 per person, per financial year. However, your unused concessional contributions are automatically carried-forward from previous financial years for up to five financial years. But, you are only able to utilise the carried-forward amounts if your total super balance was below $500,000 on 30 June of the previous financial year.

There is no restriction on making or receiving concessional contributions while under age 75, unless you are aged between 67 and 74, in which case you cannot make personal concessional contributions without satisfying the superannuation work test or work test exemption.

Are Super Contributions Tax Deductible?

Short answer: Yes, but not all of them! Some contributions to your super fund are tax deductible. These include salary sacrifice contributions, and personal concessional contributions. Let's break it down:

• Concessional Contributions: These are the ones that come with a tax deduction. When you contribute to super and claim it as a tax deduction, you’re contributing on a pre-tax basis.

  
  

• Non-Concessional Contributions: These are after-tax contributions, meaning you don’t get a tax deduction for these. They're also called "non-deductible" contributions.

  
  

Types of Tax Deductible Super Contributions

1. Employer SG Contributions: When your employer pays into your super, it's a concessional contribution, and they get a tax deduction for it.

   
   

2. Salary Sacrifice Contributions: If you sacrifice part of your salary and have it paid directly into super, that's another concessional contribution. This reduces your taxable income, and you get the tax deduction.

   
   

3. Personal Concessional Contributions: If you make contributions to super from your personal bank account, you can claim a tax deduction for those, too. But you need to notify your super fund and get confirmation before you file your tax return.

   
   

How Do I Claim a Tax Deduction for Personal Super Contributions?

It’s actually pretty simple. Contribute from your personal account, notify your super fund that you intend to claim a deduction, and wait for their confirmation. Then, when you’re doing your tax return, declare those contributions as deductible! (be mindful not to rollover your super or start a pension beforehand either).

How Does a Super Contribution Tax Deduction Benefit?

By claiming a deduction, you reduce your taxable income. For example, if you earn $100,000 and contribute $10,000 to super, your taxable income becomes $90,000. Less taxable income = less tax. This works whether it’s salary sacrifice or personal concessional contributions.

Maximum Deductible Super Contributions

The general concessional contributions cap is $30,000 per year. This includes all contributions from your employer, salary sacrifice, and personal concessional contributions. You can also carry forward unused cap amounts if your super balance is under $500,000. (more on this later).

Super Contributions Tax continued

Now, the standard contributions tax is 15%. So if you contribute $10,000 to your super, only $8,500 actually makes it into your super account after tax. If you’re earning over $250,000 a year, you’ll be hit with an extra 15% contributions tax.

Alternatively, if you're earning under $37,000, you could qualify for the Low Income Super Tax Offset (LISTO), which gives you a refund of the contributions tax up to $500. That's a nice little bonus from the ATO!

So, there you have it – a breakdown of super contributions, always check with your accountant & financial planner to make sure you’re making the most of these strategies and reducing your tax bill!