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Planning a tax-deductible super contribution? Don’t forget this step

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You can make a personal superannuation contribution and claim it on tax, but there are a few things you need to do for it to count.

Making a personal contribution to your superannuation fund is a good way to boost your super balance and your tax return at the same time. The good news is you've still got time to do this before the end of financial year (EOFY). But before you run out and add money to your super, there are a few things you need to do to make sure you benefit from the tax deduction.

How does a tax-deductible super contribution work?

Everyone is able to make up to $25,000 worth of concessional super contributions throughout the year. Concessional means the money will be taxed in the super environment, which attracts a reduced tax rate of just 15%. This is likely to be lower than your standard income tax rate.

Your concessional contributions include the super contributions your employer makes for you under the super guarantee. The super guarantee is currently 9.5% of your annual earnings (although from the new financial year this will jump up to 10% p.a.).

So if you earned, say, $100,000 for the year, your employer is required to pay you $9,500 in super. This means you can still contribute up to $15,500 yourself as concessional contributions. You can do this via salary sacrifice, which is an arrangement with your employer so they send a portion of your pre-tax income to your super instead of your bank account. This money will be taxed in the super environment from the beginning, so you don't need to claim these as a tax deduction.

Or, you can choose to make one (or several) one-off personal deductible contributions from your bank account into your super fund.

"A key benefit of making personal deductible contributions is that you are able to claim the contribution as a tax deduction and, as a result, you'll only be taxed 15%. This is a great result for Australians who earn above $50,000 a year as paying 15% contributions tax is better than having the money paid to you as salary, which can be taxed at rates of up to 47%," said AMP financial adviser Andrew Heaven.

The reason you can claim a tax deduction for these personal contributions is because this money has already had tax withheld on it at your standard income tax rate, but you want it to instead be taxed within your super at 15%.

Steps you need to take

If you want to make a personal contribution into your super and plan to claim it as a tax deduction, make sure you do this well before 30 June. Some super funds will have a deadline for personal contributions, which could be a few days or even a full week before the end of financial year.

You also need to tell your super fund that you're planning to claim the contribution on tax. "In order to be eligible to claim a tax deduction, you'll be required to submit a notice of intent to your superannuation fund before submitting a tax return for the financial year in which you make the contribution," said Heaven.

You should be able to find this form on your fund's website or by logging into your member portal. You need to send your fund the form and receive their confirmation before you can claim the contribution as a tax deduction in your tax return.

If you're not happy with your current super fund, you can easily change super funds online at any time. If you've got more than one fund in your name, here's how to consolidate super funds to ensure you're not paying multiple sets of fees unnecessarily. And if you're after a bit of help comparing your options, here are some of our best super fund picks.

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2 Responses

    Default Gravatar
    MarielleJune 19, 2024

    How much one-off personal deductible contribution can I do in order to be eligible?

      SarahJune 20, 2024Finder

      hi Marielle,

      The maximum contribution each year to access concessional tax rates (ie tax rates of 15% instead of your normal tax rate) is $27,500, including your compulsory employer contributions.

      Hope this helps!

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