Around this time of year many people are thinking about putting a little more money into superannuation to get an additional tax deduction for the tax year.
The limit for making a deductible contribution known as a “concessional contribution” for the 2020 year is $25,000
While there are many rules around making and claiming deductible contributions, some of the main ones are as follows:
The Superannuation Fund must receive the contribution by 30th June 2020
- If you are using the Superannuation Clearing House for contributions, we are advising that you should make the contribution by the 22nd June 2020. This takes in to account what seems to be a 7 day processing time from the making of the contribution to the time it is received by the fund
- If you are planning on making a contribution to your fund, speak to the fund to make certain of the cut off date for contributions.
If you are making a personal contribution , all of the following must apply to make a claim:
- you have given a valid notice of intent to claim (or vary) a deduction for personal super contributions to your super fund or RSA provider in the approved form advising them of the amount you intend to claim as a deduction (you must give this notice on or before the day you lodge your 2020 tax return or 30 June 2021, whichever is earlier)
- your super fund or RSA provider acknowledged your valid notice
- until you receive an acknowledgement from your super fund or RSA provider, you are not entitled to a deduction for personal super contributions–you may either wait to lodge your tax return until you receive the acknowledgment, or
- you may lodge now (without claiming the deduction) and request an amendment once you have received the acknowledgment.
- Note: If your super fund or RSA provider has rejected your notice or advised that it is not valid, you are not entitled to claim a deduction.
You can’t claim a deduction:
- In order to stop people ‘re-cycling” contributions (which is a scheme that has been captured by the ATO), where you made a contribution to a superannuation fund or RSA provider and later that year made a withdrawal under the COVID-19 hardship provisions. The ATO has indicated that the number of circumstances where they are comfortable with someone dipping into their super and later claiming a concessional tax-deductible contribution will be very limited in these circumstances:
- for super contributions paid by your employer directly to your super fund or RSA provider from your before-tax income such as–the compulsory superannuation guarantee
- salary sacrifice amounts
- reportable employer superannuation contributions from your annual income statement or payment summary and shown in the Income tests section
To add to the complexity around superannuation contributions, from the 1st July 2018, you may potentially be able to make ‘carry-forward’ concessional super contributions if you have a total superannuation balance of less than $500,000. In this case you are able to access the unused concessional contributions caps on a rolling basis for five years which are amounts carried forward that have not been used in previous years. For example, if you contributed $10,000 in contributions in 2019 vs a cap of $25,000, you may be able to contribute the amount of $15,000 (the difference between $25,000 and $10,000) along with the $25,000 for 2020. This would equate to a contribution of $40,000 for the 2020 year. Note, the first year in which you can access unused concessional contributions is the 2019–20 financial year.
As with everything “super” please ensure you speak with your accountant at Lowensteins or with your superannuation provider to ensure that, firstly, you are eligible to make a contribution and secondly that you meet all of the criteria to do so and to enable you to claim a tax deduction.