Tax Deductions for Super Contributions

The annual Concessional Contribution limit is $25,000 for the current 2019-2020 financial year.

Contributions in this category include your employer’s SG payments (usually 9.5%) and any salary sacrifice contributions. You can make last minute contributions at the end of the financial year, to benefit from any unused part of the $25,000 limit. This provides employees with a last-minute opportunity if they have not ‘salary sacrificed’ during the year.

The benefits of making additional contributions (within your $25,000 limit) are two-fold:

  • You will be adding to your retirement assets within a concessionally-taxed environment
  • You only pay 15% tax on funds contributed to super (unless your taxable income exceeds $250,000), which is usually significantly lower than your marginal tax rate

Example:

Trevor earns $100,000 per year, with his employer paying the standard 9.5% ($9,500) in SG – so he is well within his $25,000 annual limit. He makes a personal deductible contribution of $1,000 to super, paying $150 (15%) in contributions tax, leaving $850 invested. The contribution is tax-deductible, so it lowers his taxable income by $1,000 so his personal income tax liability drops by $390 (39% tax rate, including Medicare levy) which gives Trevor an overall tax saving of $240 (or 24%).

Our tip – if you have savings to spare and unused space in your $25,000 limit, you might want to make a contribution before 30 June.

If you didn’t use up your $25,000 limit last financial year, you may now be able to make additional contributions to use up last financial year’s unused limit too. Please see our separate article “A New Opportunity – Catch-Up Concessional Contributions” for details.

You will need to tell your fund if you are claiming a deduction for super contributions by completing a ‘Notice of Intent to Claim a Deduction’ form.

Things to be aware of:

  • For employees earning more than $250,000, an additional 15% tax may apply on super contributions
  • Contribution amounts shown on payslips are usually only indicative and may not reflect the real timing of actual payments made – so it can be difficult to determine your exact unused limit for the current financial year
  • If an employer pays super contributions for the June quarter after 1 July, those contributions go towards next year’s limit – another factor which can make it hard to calculate your annual unused limit
  • You will need to check with your payroll team as to the timing of their contributions – if any payments were withheld, this may impact your ability to contribute
  • Funds you contribute will be preserved in superannuation until you meet a condition of release
  • If you breach your concessional contribution limit, the excess contributions will be taxed at your marginal rate, along with an excess concessional contributions charge, to adjust for the late collection of the income tax liability

Let us know if you have any questions or require assistance with any last-minute super contributions.

Disclaimer: The information in this email is general advice only and has not taken into account your personal circumstances. Please seek personalised advice prior to implementing any additional contributions.

We specialise in customising strategic solutions across a range of financial services.

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