A new era of superannuation deduction commenced on the 1st of July 2017.
People who work for a wage or are required to have superannuation contributed for them by an employer to a superannuation fund are now allowed to potentially claim a taxation deduction for contributions they make to a complying super fund from 1st July 2017 from their own after-tax funds.
John Saver works for V/line and his employer contributed to his super fund over the 2017/18 financial year
John contributes from his own savings direct to his super fund $300 a week (after tax) $15,600
Total contributed for year is $22,250
The maximum that John can contribute to superannuation & get a tax deduction for is $25,000 for the 2017/18 year.
Because John’s contributions are below the $25,000 limit he gets a tax deduction for all his after-tax contributions of $15,600.
These contributions will save John $5,382 in income tax in his personal tax return.
The super fund will pay $2,340 in tax from Johns after tax contributions (15% of his personal contributions).
Thus, John has saved net income tax of $2,943 for the year.
If John’s total contributions had exceeded $25,000 he would only have been able to claim the amount he contributed from his after-tax funds that took him up to $25,000 for the year.
Employer contributions $ 6,650
Johns after tax contributions were $400 a week $20,800
Total contributions $27,450
Less limit allowed to claim a deduction $25,000
Above limit $ 2,450
John would be allowed to claim $18,350 ($20,800 - $2,450) of his contributions as a tax deduction for the 2017/18 year.
**How will the ATO check that you have not overclaimed?**
If you have made contributions from after tax savings then at the end of the financial year your super fund will send you a form asking if you will be claiming a taxation deduction for any of your after-tax contributions.
By completing & returning this form you will be advising the fund of what amount you are going to claim as a tax deduction in your 2018 income tax return.
To ascertain how much you can claim you need to obtain from your super fund how much was contributed for the 2017/18 financial year by your employer.
Then add your contributions and if that total comes to less than $25,000 you can claim all your after-tax contributions.
If the total is above $25,000 then you can only claim the amount that gets you up to $25,000.
** What about the government co-contribution?**
For people with taxable incomes below $51,000 they will need to perform a calculation to ascertain what will give them the best net result from their after-tax contributions and it may be a combination of co contribution & a tax deductable claim.
Adams Accounting can help you with this calculation.