With greater numbers of clients now eligible to claim deductions for personal superannuation contributions, the ATO has identified some common errors that practitioners and their clients should avoid.
For many super members, the 2017–18 financial year was the first opportunity they had to claim a deduction for personal super contributions, with the strategy previously only available to the self-employed.
Prior to 1 July 2017, the 10 per cent test applied, which meant that individuals were only eligible to claim a tax deduction for personal super contributions if less than 10 per cent of their income was earned from employment.
In an online update, the ATO said that the removal of the 10 per cent maximum earnings condition means that more taxpayers may now be eligible to claim a personal super contribution deduction, but warned there are some common errors to watch out for.
Before lodging the 2018 tax return, it is important to check that you are eligible to claim and that you have made personal (after tax) super contributions directly to your super fund before 30 June 2018.
In order to be eligible for deductions on contributions made on or after 1 July, the contributions cannot have been made to a Commonwealth public sector superannuation scheme in which you have a defined benefit interest, a constitutionally protected fund, or a super fund that notified the ATO before the start of the income year that it had elected to treat all member contributions as non-deductible.
You also need to meet the age restrictions. Clients aged between 65 and 74 may be eligible to use this strategy if they meet the work test.
It is important to ensure that you have sent a notice of intent to claim or vary a deduction for personal super contributions to your super fund and received an acknowledgement.
It also noted that members can only claim deductions for their after-tax personal super contributions and not from before-tax income such as the superannuation guarantee, salary sacrifice or reportable employer super contributions shown on their payment summary.