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Personal tax-deductible superannuation contributions can save you tax


If there is a change in government this opportunity to top up your superannuation and reduce your taxes will ben gone.

Act now to use what could be one last chance.

New rules, introduce in 1 July 2017, broke the nexus between being employed and not being able to make personal deductible contributions to your superannuation.

If you are under age 75, (age 65 to 74 you must satisfy the work test) this is an opportunity.

Prior to July 2017, if your employment income exceeded 10% of your income, you were unable to make a personal deductible contribution.

Now, so long as you comply with a number of provisions, you can reduce your taxable income by making a personal tax deductible contribution and benefit from the differential between your personal marginal tax rate plus Medicare, and the general 15% contribution tax rate to super.

Your concessional contributions, including employer contributions, salary sacrificed contributions plus personal deductible contributions, must total less than $25,000. If you contribute too much to your super, you may have to pay extra tax.

This is a tax management and super building opportunity for those:

  • changing between employee to self-employed status

  • part-time employed and part-time self-employed

  • receiving a bonus or other additional payments from their employer

  • who have changed jobs and received a lump sum

  • receiving a capital gain

  • receiving a distribution from a trust

  • other additional income

  • who have 'surplus' income

If you make a personal deductible contribution you must submit a valid Notice of Intent within the required time frame and claim a deduction in your tax return.

There are a limited number of funds that cannot receive a personal deductible contribution.

The differences between salary sacrifice and a personal deductible contribution are cash flow, control and flexibility. There is no net difference.

Note: Division 293 tax is an additional tax on super contributions if your combined income and super contributions are more than the threshold. From 1 July 2017 this threshold is being reduced to $250,000.

Division 293 tax is 15% of your taxable concessional contributions above the $250,000 threshold.

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