Tax for SMSF members: What personal contribution deductions can I claim?

As a member of a self-managed superannuation fund (SMSF) there are different types of contributions you can make to your fund.

If these contributions fit within allowed limits, you may also be able to claim a tax deduction on the contribution.

In this case, the contribution is classified as a concessional contribution.

A tax deduction is available if your income comes from a wide variety of sources including:

• Wages and salaries
• Self-employment
• Investments
• Government pensions
• Superannuation.

The current rules came into effect on 1 July 2017.

The $25,000 limit

The key thing to remember is that, in total, your employer contributions (including salary sacrifice contributions) and the contribution on which you intend to claim a personal tax deduction cannot exceed $25,000 per year.

If you exceed this cap you will be slugged with extra tax and your excess concessional contribution will be counted towards your non-concessional contributions cap.

Concessional contributions can be made, and therefore a tax deduction claimed, if you are under the age of 75.

However, if you are over the age of 65 you must meet the ‘work test’ of working at least 40 hours within a 30-day period and within the financial year in which you make the contribution.

For recent retirees that fail the work test requirements, there are new exemptions starting from 1 July 2019 that loosen restrictions for people aged 65 to 74 who want to make concessional contributions.

From the start of the next financial year, people aged 65 to 74 that do not satisfy the work test standards can still make concessional contributions if they:

• Satisfied the work test in the financial year prior to the financial year when the contributions were made.
• Had a total super balance of less than $300,000 at the end of the previous financial year.
• Made no contributions to a regulated super fund under the work test exemption in a prior financial year.

Notifying the fund

If you intend to claim a tax deduction on your personal contribution you must notify the trustee of the fund (even if that also happens to be you) that this is your intention.

Notice must be given by the earlier of when you lodge your personal tax return for the financial year in which the contribution was made, or the end of the financial year after the one in which the contribution was made. You should also notify the ATO when a pension is commenced on the contribution.

Notice must be given by completing form NAT 71121 available from the tax office.

Other benefits

Aside from claiming a tax deduction on personal contributions, if your spouse or partner earns less than $40,000 per annum, you may be able to claim a tax offset (rebate) of up to $540 by making a spouse contribution.

And if you are in a low-to-middle income bracket (e.g. earning less than $53,564 in the 2019-2020 financial year or $54,837 in the 2020-2021 financial year) and make a personal, non-concessional contribution of $1,000 to super, the government will kick up to $500 as a co-contribution.

Identifying the right strategy

Making the most of super tax deductions and other incentives, year in and year out, can give your nest-egg a real boost.

Super is just one part of a wealth creation program, and other strategies may also have a role to play in helping you attain your personal long-term goals.

Our superannuation and wealth management experts can help you make the most of super contribution tax deductions, along with a raft of other financial strategies.

To find out more, call us (03) 9875 2900 or fill out the form below and let’s set up a time to talk.

Editor’s note: This article was originally published on February 11, 2019, and has been updated to include new information.