Don't Miss Out On Your Super Deduction At Tax Time

The number one tax strategy to minimise tax, whether you are an individual or business is by making super contributions by 30 June. However, it is easy to miss out on a tax deduction if you don’t know the rules. Here is what you need to know to make sure you don’t miss out:

1. Contributions must be allocated to a member’s account by 30 June

Contributions need to be made in advance of 30 June to guarantee that they are allocated to members’ accounts by 30 June in order to claim a deduction in the current financial year. For businesses who have a due date of 28 July to make super contributions for the June quarter this is also true, if they want the deduction in the current financial year. Leaving the payments to the last minute or until July will mean the deduction will have to wait another year.

The only exception to this is where the contributions are made to the ATO’s Small Business Clearing House, where contributions will be deductible if they are paid on 30 June.

2. Contributions over the concessional cap aren’t tax deductible

The concessional contribution cap for the 2022 financial year is $27,500. This means that the total deduction that can be claimed for super contributions for any individual is $27,500. Counting towards the cap are:

a) Contributions made by an employer

b) Pre-tax salary sacrificed amounts

c) Member personal contributions

The only exception to this is if an individual has unused concessional contributions from the 2020 financial year onwards and a total super balance of less than $500,000. In this case you can make concessional contributions up to the value of the unused cap in prior years. Concessional contribution caps can be carried forward for a maximum of 5 years. You can find the balance of any unused concessional caps on myGov or by asking your accountant.

Contributions made over and above will either be non-concessional contributions (i.e. contributions where no tax deduction can be claimed) or can be taken out of the fund once you have received advice from the ATO to do so. Non-concessional contributions of up to $110,000 can be made in any one year or $330,000 if the bring forward arrangement is triggered. If a bring forward arrangement is triggered you can use the cap of the following two years in the current year.

3. Business need to have made employee contributions by the due date throughout the year

A business will not be eligible for a tax deduction for super that is not paid by each of the due dates throughout the year. The due date for contributions to be received into a member’s account are:

• 28 October

• 28 January

• 28 April

• 28 July

Again this means that contributions need to be paid well in advance of the 28 day cut off date. You can read our blog Superannuation, too costly to be out of sight out of mind to learn more about what you need to do if you haven’t paid your super on time.

The only exception to this is where the contributions are made to the ATO’s Small Business Clearing House, where contributions will be deductible if they are paid on the due date.

4. Notice of intention to claim must be lodged for individual member contributions

For an individual to claim a deduction for personal contributions they have made they need to complete a notice of intention to claim a tax deduction form and lodge it with their super fund. This should be done prior to the lodgement of their tax return. The amount on the form does not include any contributions made by an employer (including salary sacrificed amounts), it is only for contributions the member has made from personal savings.

On receipt of a notice of intention to claim the fund will notify the ATO and also advise you in writing. Claiming a super deduction without this form being lodged will result in the ATO amending your tax return.

If you are considering additional super contributions this tax time, we recommend that you seek advice. Member balance limits and age limits apply to the above please speak to your accountant or financial planner to see which caps apply to you.

If you would like specific advice tailored to your business and circumstances, Accounting Heart offers affordable service packages where you can work with Sonia one-on-one to help you get your business where you want it to be. Book your FREE Discovery Call to find out more.

Disclaimer: This is general information only and is not advice of any sort. No warranty or representation is provided by Accounting Heart Pty Ltd as to the accuracy, currency or completeness of the information contained in this blog. Readers of this blog should not act or refrain from acting in reliance upon any information contained herein and must always obtain appropriate taxation and / or other advice as may be appropriate having regard to their particular circumstances.