STRATEGY
The bigger contributions horizon
A few years ago individuals were given greater flexibility as to how they make tax-deductible superannuation contributions. Tim Miller details the intricacies of the personal deductible contribution rules and their strategic implications.
TIM MILLER is education manager at SuperGuardian.
56 selfmanagedsuper
One of the better changes to come from the 1 July 2017 superannuation reforms was the capacity for individuals, regardless of their employment status, to maximise the contributions they could make to an SMSF, or other fund, and reduce their personal tax liability by claiming a deduction on any personal contributions up to the concessional contributions cap. While this presents a great opportunity, there are still some issues of which contributors and SMSF trustees need to be aware when making and receiving personal deductible contributions.
the capacity as an employee, can make personal deductible contributions in addition to the mandated employer contributions they receive. Prior to 1 July 2017, an individual who was an employee could only claim a deduction if their employment-related income accounted for less than 10 per cent of their total income. Now, these contributions are an alternative or indeed a supplement to any additional employer contributions, such as those offered through a salary sacrifice arrangement. Of course, self-employed individuals and individuals in receipt of passive income can also make personal contributions and claim a deduction so long as they have sufficient income for the deduction to offset, so ultimately the changes just broadened the scope of availability. As a result, most individuals under 75 years old can claim a tax deduction for personal contributions to their SMSF, including those aged 67 to 74 who meet the work test.
What are personal deductible contributions?
Personal deductible or salary sacrifice
Individuals receiving employment income, in
Personal deductible contributions are not necessarily
