Tax also applies to your super, albeit at a generous rate of 15 per cent if the contributions were made before any tax was applied. On the other hand, voluntary non-concessional contributions are made after tax has already been applied to your income, which means it may be taxed at a higher rate.
However, the Australian Taxation Office (ATO) allows taxpayers to claim deductions on their personal contributions to super to encourage voluntary contributions.
If you are eligible, you may be able to claim a tax deduction on your personal super contributions under certain conditions.
Super contributions tax deductions you can claim
As at 1 July 2017, the non-concessional contributions cap is $100,000 for all ages.
If you receive income from any of the items in the list below, you may be eligible to claim a deduction on your contributions:
- salary and wages
- a personal business (e.g. self-employed or freelancers)
- investments (including interest, dividends, rent and capital gains)
- government pensions or allowances
- a foreign source (e.g. foreign employer that pays into your super)
- super (except for rolled-over super benefits)
- partnership or trust distributions
Non-concessional contributions
The ATO allows tax deduction claims for after-tax voluntary super contributions.
After-tax super contributions come from your net income, which means your marginal tax rate has already been applied to the amount.
You may claim a tax deduction on the full amount of your personal non-concessional contribution as long as the amount is within the non-concessional contributions cap. Likewise, you will need to give your fund a “Notice of intent to claim or vary a deduction for personal contributions” form (NAT 71121) and they must acknowledge it in writing.
This is to prevent the fund from reporting your contribution as part of the fund’s assessable income – if they include it, you can’t claim it in your own tax return.
Spouse super contribution
Higher-income spouses may also make non-concessional spouse super contributions to their unemployed or lower-income spouse earning a maximum of $37,000 annually.
Non-concessional contributions grant the contributing spouse a tax offset on their tax return. The offset may be computed as the lower amount between:
- $540 (18 per cent of $3,000) which decreases by $1 for each $1 income in excess of the $37,000 threshold
- 18 per cent of the contributed amount
However, both spouses must be eligible in order to claim the tax offset. To know more about the criteria for eligibility, read nestegg’s “Tax benefits for voluntary super contributions made on behalf of spouse”.
Super contributions you can’t claim tax deductions for
Concessional contributions cap is currently at $25,000.
Concessional contributions
Pre-tax contributions to super cannot be claimed as a tax deduction because they are contributed to super before any tax is withheld.
This applies to both super guarantee and salary sacrifice contributions.
Super co-contribution
Super co-contributions come from the government are given to low-income earners who make voluntary super contributions.
You can’t claim a tax deduction on the government co-contribution.
Explore nestegg to know more about superannuation and taxes.
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