T
he end of the financial year is fast
approaching and it’s worth checking
to see how your super contributions
are tracking. If, like most people, your
employer’s super guarantee hasn’t hit the
annual $25,000 cap you may want to top it
up with a personal deductible contribution.
Thanks to a rule change set in place a
few years ago, fund members can make
concessional contributions directly into
their fund and claim a tax deduction when
doing their tax returns. The rule change
provides members with greater flexibility
and an incentive to save.
Apart from boosting savings, there are
other tax benefits. Concessional contri-
butions are taxed at just 15%. For many
employees this is lower than the rate paid
on their take-home pay, which can be as
high as 45%. It also has the potential to
lower your tax bracket.
“The key thing here is that anyone can
make a personal deductible contribution
to super and you don’t have to go via
your employer to do so provided that your
employer contribution, and your personal
deductible contribution combined, don’t
exceed $25,000,” says Claire Mackay,
a director and independent financial
adviser at Quantum Financial.
Previously, only salaried employees
could top up their super with concessional
contributions using their employer’s salary
sacrifice benefit. However, not all employ-
ers offer it, which meant many employees,
especially those working for small busi-
ness, missed out.
Most people make their contribution
towards the end of the financial year
when they can more readily determine
how much they can contribute directly
without exceeding the cap.
While many employers pay the 9.5% SG“The law requires every employer to pay
your super contribution for a quarter no
later than 28 days after the end of a quar-
ter,” says Mackay. “So your employer might
have paid the end of the 2017-18 quarter
in July last year, and then decided to pay
the June quarter this year in June.
“This is where people get tripped up.
The employer may change it year on year
depending on their cash flow and the like.
So make sure you err on the side of cau-
tion,” she warns.
This means checking your payslips
and asking payroll to let you know exactly
when the contributions were paid into your
super from July through to now. You should
also cross-check it with the transaction
history in your super account for the
period from July 1.
Mackay says the rule change is welcome.
“Knowing that you don’t have to rely on
your employer to make the payment means
that everyone, regardless of your employ-
ment situation, can do this, without
breaching these really archaic rules- the old 10% rule [see breakout].
“Everyone has control of how they set
themselves up for retirement. And every
little bit that you can put into super helps - you are getting a tax deduction and it
can improve your lifestyle in retirement.
“However, if your employer does provide
salary sacrifice, you might look to make
your personal contribution this year but then
instigate regular salary sacrifice. The beauty
about having it is that the money doesn’t hit
your bank account, you don’t spend it and it’s
guaranteed to happen every pay cycle.”
Vita Palestrant was editor of the Money
section of The Sydney Morning Herald
and The Age. She has worked on major
newspapers overseas.Make sure the
cap fits
Topping up your deductible contributions
minimises tax and maximisessavings
SUPER Vita Palestrant
HOWITWORKS
Previously only those who earned less than
10% of their total income as an employee
were eligible to claim a deduction for per-
sonal super contributions.
This meant full-time employees and
people who were self-employed but also
worked part-time for an employer were
largely excluded.
The 10% rule was dropped in July 1, 2017,
giving people under 75 the ability to claim
an income tax deduction for after-tax
personal super contributions.
Make sure the contribution hits your
super fund before the end of the financial
year. If the contribution is received after
June 30 you will have to wait until the
following financial year to claim it.
Paperwork is also important.
Once you have made your contribution
either by BPay or cheque, fill in a notification
form called “Notice of intent to claim or vary
a deduction for personal super contribu-
tions”. It’s available on the website of most
funds and the ATO. Once you’ve sent it back
to your fund, you should receive an acknowl-
edgement. You’ll need this to claim the
deduction when you lodge your tax returns.
“If you don’t tell the super fund or you
don’t claim a deduction in your personal tax
return, it won’t be classified as a deductible
contribution. It will be classified as a post-
tax contribution,” says Mackay.
For more information see ato.
gov.au/individuals/super/in-detail/
growing-your-super/claiming-deduc-
tions-for-personal-super-contributions.S
contributions fortnightly or monthly, with
their employee’s pay, others choose to pay it
quarterly, making it harder to monitor how
much your employer has contributed for
the financial year.