How good does this sound? Add to your super and score tax savings today while building your nest egg for the future. We explain how to claim personal super contributions on tax.
Most Australians know that super is money for retirement. What’s less well known is that you don’t have to rely on your bosses’ contributions to grow your super savings. Better still, money you add to super from your own pocket can be tax deductible.
Not so long ago, you needed to be self-employed to claim super contributions on tax.
That all changed from 1 July 2017. These days you may be able to claim a tax deduction for personal contributions even if you are a PAYG employee.
Can you add to your super and claim contributions back on tax?
Up to $25,000 can be added to your super each year in ‘before-tax’ contributions. These are typically taxed at 15%. That’s likely to be a lot lower than your personal tax rate. So adding to your super can be a tax-friendly way to grow your super.
By following a few simple rules, you can also claim your super contributions on tax, and be rewarded with tax savings.
$25,000 tax-deductible contributions limit
The catch is that before-tax super contributions are limited to $25,000 annually. This figure includes contributions made by your employer.
As a guide, if your boss has already paid $20,000 into your super, you can claim up to $5,000 in personal contributions in the current financial year. If your employer uses the new single touch payroll system, you can see how much has been added to your super at any stage.
If you’re aged 65 to 74 years old, you’ll also need to meet a work test. That means working at least 40 hours in a consecutive 30-day period each financial year.
What you need to do
Making a tax deductible contribution to your fund is easy. It can usually be done as a bill payment from your everyday bank account. Check you have the right BPAY details for your fund, and allow a few days before 30 June for the money to reach your super account.
The important thing is to tell your super fund you want to claim a deduction before you lodge your personal tax return. This lets your super fund know that 15% of your contribution needs to be paid to the Tax Office. Your fund will write back confirming your plans.
Putting it all together
Let’s look at a simple example to see how it all works.
We’ll say Sue works as a shop manager. She earns a salary of $45,000, and so far this financial year her boss has paid $4,275 into her super fund. That’s well below the $25,000 annual limit so Sue has plenty of room to add to her fund.
Sue pays $3,000 into her super account before 30 June. Then she lets her fund know in writing that she plans to claim the contribution on tax. She receives a letter back from her super fund stating that her tax contribution has been received.
Now Sue can claim a $3,000 tax deduction for her personal super contribution. It’s an easy way to save on tax and build money for her future.
To know more about claiming a tax deduction for personal super contributions, or for help filling out the paperwork, contact your Etax tax agent.