If we reach the $25k concessional cap & allow insurance deductions to occur prior to lodging our intention to claim, does this mean we can pay more than the $25k cap into our super each year to account for insurance fees & then claim the full $25k cap at the time of lodging our tax return? If you do this, your contribution will be taxed at a rate of 15%. Is the payment of a fund expense such as auditors or accounting fees or advice fees considered a withdrawal in this situation? If the notice of intent is lodged just before the tax return is lodged the full amount of the contribution is invested until the notice is processed and tax deducted. To obtain advice tailored to your situation, contact a professional financial adviser. Tax-deductible super contributions. Conditions for claiming a tax deduction for personal contributions include: The notice of intent to claim a tax deduction must be submitted on or before the first of the following dates: Where a member makes a partial withdrawal during the year, part of the withdrawal is defined as including contributions made before the withdrawal. If you want to make the most of the recently increased superannuation personal contribution limits, here is a timely explanation of how to use the 'bring forward' rule to your advantage. It should be noted that some funds have a cut off date for the processing of “notice of intention to claim a tax deduction “. Many investors focus primarily on the big listed companies but the smaller end in tech, mining and healthcare outperforms through innovation. The concessional contribution limit is $25,000, regardless of your age. Personal contributions are non-concessional (after-tax) contributions and will count towards your non-concessional contributions cap unless you have claimed a tax deduction for them. Concessional super contributions are payments put into your super fund from your pre-tax income and are tax deductable for self-employed people. Make sure you have the information for the right year before making decisions based on that information. Refer to our Financial Services Guide (FSG) for more information. This means tax savings may be available, depending on your income. Tax-deductible super contributions. However, many employers don’t offer salary-sacrifice. Hi Julie, This is something to consider. The portion of the $12,000 that remains in the fund is calculated as follows: Roll-over amount x (Tax-free component of interest before withdrawal / Value of super interest before withdrawal), Tax-free component of interest before withdrawal - Tax-free component of the withdrawal (from Step 1), Tax-free component of the remaining interest (from step 2) x (Personal contribution / Tax-free component of interest before withdrawal). Remember the proposed Retirement Income Covenant? When deciding whether to claim a deduction for super contributions, you should consider the super impacts that may arise from this, including whether: If you exceed your cap, you will have to pay extra tax and any excess concessional contributions will count towards your non-concessional contributions cap. This article helps you determine if your super contributions are tax deductible and how they can be made. If you exceed this, penalties will apply. Brian then lodges a notice with the intention to claim a deduction for the $24,000 contribution. Our final packed edition for the year ... but first, if there is one thing 2020 taught us, it is to expect the unexpected. Meanwhile, those under 18 can only claim a tax deduction on a super contribution if they’ve earned income as an employee or a business operator during the year. any personal super contributions that you claim as a tax deduction. Brian makes a further $12,000 of contributions before the next 30 June. 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Also, by claiming the contribution as a tax deduction, the net tax saving will be $1,950. 30 June of the following financial year after the client made the contributions. ", Reader: "I can quickly sort the items that I am interested in, then research them more fully. The contribution amount no longer forms a part of your taxable income. If Brian made a further rollover on 30 June to fund insurance premiums the process would be repeated and the amount available to claim reduced further. The rules on personal tax-deductible super contributions Personal contributions are concessional contribution s so, they’re capped at $25,000 per financial year 1. Brian contributes $2,000 per month to his super fund and intends to claim $24,000 as a tax deduction. Brian could claim the whole $24,000 by lodging a notice of intent to claim a tax deduction before the rollover occurs. Some of the information on this website applies to a specific financial year. A tax deduction can be claimed for: Any voluntary after-tax super contributions, including those made by transferring funds from your bank account to your QSuper account (e.g. Concessional contributions are also known as before-tax contributions and are subject to 15% tax in your super fund. There are caps on the non-concessional contributions you can make each financial year. The proportion is the value of the relevant contribution divided by the tax-free component of the superannuation interest immediately before the partial withdrawal. In normal times that should give a better result but in the time of Covid, maybe not. ", Reader: "It's excellent so please don't pollute the content with boring mainstream financial 'waffle' and adverts for stuff we don't want! They usually consist of: Your employers’ mandatory contributions (minimum 9.5% of your salary), and Your pre-tax or salary sacrifice contributions. Regards ... As the contribution for June 2020 was paid to Yani’s super fund on 28 July 2020, the tax deduction for this contribution cannot be claimed in … Accordingly, it is best to check with the fund before rolling over. As at 31 December, Brian’s super balance is $50,000 and the tax-free component in his super fund (so far) is $12,000 (the contributions for which a notice of intent to claim a tax deduction has not been received by the fund). The amount that can be claimed is calculated according to the following formula: Step 1 – Calculate the tax-free amount of the withdrawal, Step 2 – Calculate the tax-free component of the remaining interest, Step 3 – Calculate the remaining amount of the personal contribution. There are two types of contributions that can be made into superannuation. Please keep it up and don't change! Despite the wave of optimism currently sweeping markets, some negative factors demand caution. Hi Robert, do not include super contributions made through a salary-sacrifice arrangement. ... and you will not be eligible to claim tax deduction … ", Reader: "Keep it up - the independence is refreshing and is demonstrated by the variety of well credentialed commentators. Hi Julie, 1269.1 07/20 ISS5 page 1 of 4 Claiming a tax deduction for personal super contributions ", Australian Investors Association: "Australia's foremost independent financial newsletter for professionals and self-directed investors. ", Reader: "Congratulations on a great focussed news source. If the notice is lodged immediately after making the contribution then only 85% of the contribution is invested. These are known as ‘Concessional Contributions’ and ‘Non-Concessional Contributions’. The contribution is normally taxed at 15%. 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