Superannuation Contributions & My Return: What Can I Claim?

In some circumstances, superannuation contributions can be claimed on your tax return if made to a super fund or retirement savings account. However, these circumstances are limited and may require professional advice to maximise the benefits.

Superannuation contributions paid by your employers directly to your super fund from your before-income tax cannot be claimed. These contributions include:

  • The compulsory super guarantee (increasing to 11% on 1 July 2023)
  • Salary-sacrificing super amounts
  • Reportable employer super contributions.

However, your superannuation contributions to your super fund from your after-tax income can be claimed. The personal super contributions you claim as a deduction will count towards your concessional contributions cap.

Super contributions that can be claimed as deductions may include

  • contributions made prior to 1 July 2017 if
    • they were made to a complying super fund or a retirement savings account (we’ll refer to both as ‘your fund’)
    • your earnings as an employee were less than the maximum allowed
  • for contributions made on or after 1 July 2017, you made contributions to your fund that was not a
    • Commonwealth public sector super scheme in which you have a defined benefit interest
    • Constitutionally protected fund (CPF) or another untaxed fund that would not include your contribution in its assessable income
    • super fund that notified us before the start of the income year that they elected to either treat all member contributions to the
      • super fund as non-deductible
      • defined benefit interest within the fund as non-deductible
  • you meet the age restrictions
  • you have given your fund a Notice of intent to claim or vary a deduction for personal contributions (NAT 71121)
  • your fund has validated your notice of intent form and sent you an acknowledgment.

Specific contributions cannot be claimed as tax deductions. These include:

  • a rolled-over super benefit
  • a benefit transferred from a foreign super fund
  • a directed termination payment paid into a super plan by an employer under transitional arrangements that applied until 30 June 2012
  • contributions paid by your employer from your before-tax income (including the compulsory super guarantee and salary sacrifice amounts)
  • First Home Super Saver (FHSS) amounts that you have re-contributed to your super fund(s)
  • contributions to
    • a Commonwealth public sector super scheme in which you have a defined benefit interest
    • a super fund that would not include the contribution in their assessable income, such as an untaxed fund or a constitutionally protected fund (CPF)
    • other super funds or contributions specified in the regulations
  • contributions made from 1 July 2018 to a super fund that are identified as downsizer contributions
  • re-contribution of COVID-19 early release of superannuation amounts.

When deciding whether to claim a deduction for super contributions, you should consider the super impacts that may arise from this, including whether:

  • you will exceed your contribution caps
  • Division 293 tax applies to you
  • you wish to split your contributions with your spouse
  • it will affect your super co-contribution eligibility.

If you exceed your cap, you must pay extra tax, and any excess concessional contributions will count towards your non-concessional contributions cap.

Your super fund must be notified before claiming the tax deduction against your personal super contributions. You must give a notice of intent to claim or vary a deduction to your fund by the earlier of either the:

  • day you lodge your tax return for the year in which you made the contributions
  • end of the income year following the one you made the contributions.

Your fund must send you a written acknowledgment telling you they have received a valid notice from you. You must receive the acknowledgment from your fund before you claim the deduction on your tax return.

Maximising your superannuation’s potential could start with boosting your savings with contributions. However, seeking professional advice or guidance before commencing is advisable, as failure to lodge a notice of intent to claim or vary can become an issue.

Why not start a conversation with us to see how we can assist?

Superannuation Tips For The Self-Employed

For self-employed individuals, superannuation may become a neglected aspect of your payroll to yourself. It is not a requirement for self-employed individuals to pay themselves it (though it is strongly recommended).

To prevent losing out on the compounding interest of superannuation (and a potentially boosted financial situation in your retirement), paying superannuation contributions now can help to feel more secure in the long run.

Contributions you make to your super will only be taxed at 15%. Depending on which tax bracket you fit into, this might be a concession compared to your usual tax rates.

Additionally, investing your super will most likely yield a higher return than putting your money into a bank savings account.

You should be able to contribute to your pre-existing super fund after becoming self-employed. All you need to do is provide the fund with your tax file number (TFN) so that your contributions can be added to the fund.

There are two ways you can contribute to the fund, which are dependent on how you receive income:

  • Wage: Make regular transfers to the super fund from your pre-tax income
  • Income from business revenue: Transfer lump sum amounts when there is sufficient cash flow

If you make contributions to the super fund from your pre-tax income, then you can claim tax deductions for them. Your overall taxable income is reduced as well. Make sure you complete a ‘Notice of Intent to Claim’ so that you receive this deduction.

There are limits to the amount of money you can contribute to your super every financial year:

  • Up to $27,500 in concessional contributions (from pre-tax income, so you can claim a deduction)
  • Up to $110,000 in non-concessional contributions (from after-tax income)

For example, employers contribute at least 10.5% of an employee’s earnings to their super – if you are not sure how much to contribute yourself, this could be a starting point.

If you are a low-income earner, you may meet the eligibility criteria for government super co-contributions.

Although it may be difficult to make super contributions when self-employed, consider starting the process so that you have some financial security when you are in your retirement period.

Calls For Super To Be Paid With Payroll

There’s been a lot of buzz around superannuation since the 2023-24 Federal Budget was announced. One such buzz involves the concept of ‘payday super’.

Payday super has been introduced by the government to avoid the discrepancies that those in lower-paid, casual and insecure work often encounter with their superannuation compared to others in more secure positions due to less-frequently paid super.

Employers are currently required to pay the superannuation guarantee of 10.5% on top of employee wages every quarter, even if workers are paid more frequently in fortnightly or monthly pay cycles.

The idea behind payday super is that rather than employers pay their employees their superannuation quarterly, they will be expected to pay it to employees when their pay cycles are run (on ‘payday’). This reform is to come into effect from July 2026.

Aligning the payment of superannuation with wages and salaries will increase retirement incomes through greater compounding returns.

For example – a 25-year-old on an average income who currently receives their super quarterly and their wages fortnightly could be up to $6000 or 1.5% better off at retirement.

More frequent super payments could also help employers by making payrolls smoother, with fewer liabilities building up on their books and making it harder for employees to be exploited by disreputable employers.

Unpaid super is a key issue afflicting the current superannuation system, with an estimated $5 billion missing from Australian employees.

Currently, Australian employees are vulnerable to exploitation if their employer fails to make the required superannuation contributions.

These workers often rely on ATO intervention to recover lost super. However, the ATO can only generally recover up to 15% of owed superannuation.

Could This Assist In Bridging The Gender Gap? 

Another issue for which this may lead to some form of amendment is the gender gap in superannuation.

Women are often victims of this exploitation of unpaid or missing super due to gaps in employment that may occur, affecting how their superannuation compounds and/or stagnates. This could be from taking time off work for caregiving reasons, the overall pay from their job, or even just taking maternity leave. Women are also more likely to be employed in certain areas and industry jobs where they are at risk of unpaid super.

It is believed that women will likely earn $135,000 less than their male counterparts over their working lives as a result. Payday super could potentially lead to further action regarding improving the retirement outcomes for women who take time out of the workforce, such as paying super on paid parental leave.

What Risks Are There To My Business?

Some employers may face cashflow issues when paying superannuation at the same time as payroll. However, three years of notice has been given to those who may have these issues to adjust their cashflow practices and make arrangements. To avoid compliance issues with the requirements to be instated in 2026, it’s best to update payroll systems beforehand.

Not sure where to start? Speak with your trusted business adviser today. We’re here to help with the complexities that can arise with payroll.

What’s In The Works For Superannuation?

Superannuation was not a source of significant surprises in this year’s Federal Budget, as many of the changes announced had already been previously discussed. However, these changes are still important to consider when planning your superannuation strategies for the next financial year.

$3 Million Super Balances & Tax

As announced in March 2023, extra tax will need to be paid on the earnings associated with superannuation balances over $3 million. This will be a tax paid by the individual based on the growth in their superannuation accounts over a year, in proportion to their total super balance of over $3 million.

For example, you will only be taxed at the 30% rate on the excess over $3 million – the $3 million will be taxed at 15%. You can pay this amount yourself, or release it from super to pay it.

However, this measure will not come into effect until the 2026 financial year.

Payday Super

Businesses will soon have to pay their employees super along with each pay run. If you pay your employees weekly, you will also have to pay their superannuation weekly. This will come into effect from 1 July 2026, so payroll systems can be altered and amended to suit the changes. If you need assistance with this process, feel free to consult with a professional advisor, like us.

NALE Changes

The previous government introduced changes to what is known as Non-Arms Length Expenses (‘NALE’) of Self Managed Superannuation Funds. Where a fund underpays a related party for services or assets, then the fund is subject to 45% tax on either any earnings related to that expense or where you can’t relate an expense to any particular earnings, it is 45% tax on all the earnings of the Fund. The amendment will limit the tax on any non-arms length expense that doesn’t relate to any particular earnings to 45% at double the value of the expense.

With these changes to superannuation to take place over the next few years, it is important to discuss with a professional adviser any action you may need to take in preparation. Start a conversation today

Are You At Risk Of Unpaid Super?

Do you trust that your employer is paying you the right amount of superannuation just because it says so on your payslip?

Every year, thousands of employers fail to pay their staff the correct amount of superannuation, costing those workers billions of dollars every year. In many instances, it’s an honest mistake and easily rectified. However, some malicious employers may be looking to avoid having to pay you the correct super guarantee.

You may not have realised it either if you trust the information on your payslip is correct.

What Am I Supposed To Receive? 

From 1 July 2022 to 30 June 2023, the superannuation guarantee rate has been 10.5% of your income. From 1 July 2023 to 30 June 2024, the superannuation guarantee rate will be 11%.

Your employer must make regular payments to your superannuation fund.

How Do I Check?

Checking for unpaid superannuation is very simple. You can:

  • Call your superannuation fund directly or
  • Check your statement online

If you are unsure of the amount of superannuation owed, you can also contact the Australian Taxation Office (ATO) to chase down the unpaid superannuation. They will be able to determine if an offence has been committed and will be able to punish them.

However, if a company is going through insolvency proceedings and you haven’t been paid superannuation, it can get a little more tricky. The ATO in this instance won’t pursue the unpaid super, but you yourself will be able to legally pursue the company directors in court.

Are You Eligible To Opt Out Of The Super Guarantee?

Were you aware that, if you meet certain conditions, you may not have to receive the super guarantee from some of your employers?

From 1 January 2020, eligible individuals with multiple jobs have been able to apply to opt out of receiving a super guarantee (SG) from some of their employers.

You may be eligible to apply if you:

  • have more than one employer and
  • expect that your employers’ mandatory concessional super contributions will exceed your concessional contributions cap for a financial year.

Eligible employees can apply for the super guarantee shortfall exemption certificate when they complete the Super guarantee opt-out for high-income earners with multiple employers form (NAT 75067).

When you opt out of SG contributions, you must still receive SGC from at least one employer. If other employers agree to use the SG exemption, then they may provide an alternative remuneration package instead so as not to be disadvantaged.

However, the exemption certificate:

  • Does not restrict the employer from making super contributions on behalf of the employee.
  • Does not change the employer’s obligations or an employer’s agreement with their super fund.Cannot be varied or revoked once issued.

The exemption certificate means the employer will not be liable for the super guarantee charge (SGC) if they don’t make SG contributions on your behalf for the quarters covered by the certificate. You must talk to your employer before applying, as they can choose to disregard an exemption certificate and continue to make SG contributions.

This measure may not benefit everyone eligible. Consider your employment arrangements, such as how your pay and other entitlements may change and the effect of any relevant award or workplace agreement applicable to you to determine if this measure will benefit you.

As your accountant or tax agent, we may be able to provide further advice based on your circumstances, so why not speak with us?

A How-To Guide For Winding Up An SMSF

If you’re a trustee of a self-managed super fund, some reasons or circumstances could have emerged that may result in you wanting to get out of that fund.

These may be personal circumstances (such as a divorce or another trustee dying), financial reasons (investments not performing as they should or you aren’t taking a pension after retiring) or you simply may not have the time to manage it efficiently anymore.

Whatever the reason, getting out of a self-managed super fund is no easy task. An SMSF cannot simply be placed ‘on hold’ as it were, as an SMSF must be completely closed down (unless members are remaining). You cannot simply take your funds out of the SMSF, especially if it is in the name of multiple trustees.

Getting out of your SMSF can be a complex process, with a lot of paperwork and responsibilities you must ensure are met. Failing to meet those responsibilities as a trustee, even when winding up your SMSF, could lead to financial and legal ramifications (such as penalties and fines).

Though some of the steps for winding up an SMSF might be self-explanatory, ensure you cover your bases by ensuring that the following steps are followed.

Consent Of Trustees Must Be Obtained

As with most decisions that are to do with an SMSF, consent from the fund’s trustees must be obtained in writing at a trustee meeting. A resolution that the SMSF is to be wound up is to be made and all trustees need to agree to it. This must be minuted and signed by all trustees.

After this consent is obtained, the Australian Taxation Office (ATO) must be notified of the fund being wound up within 28 days of the decision being made.

Check Your Trust Deed

This may contain instructions or information pertaining to how your SMSF needs to be wound up and the specific steps that need to be taken. Work Out What Will Happen To Member

Benefits

An SMSF can only be closed when there are no funds available, so any existing monies within the account need to be paid out to members who are able to access their super (if they have met a condition of release) or rolled over to another super fund.

You also need to take into consideration events that may affect other members’ transfer balance accounts (which may need to be reported by the SMSF).

Paying Out The Fund to members

If members are still in the accumulation phase, they need to rollover their funds into another super fund. This can be any kind of super fund – such as industry and retail funds – and doesn’t need to be another SMSF. You also need to take into account if any of the assets within the SMSF will incur Capital Gains Tax if they are sold to fund member benefits payouts.

Appoint An Auditor

Appoint an auditor to complete a final audit of the SMSF before you lodge your final tax return. They must be ASIC approved. The audit will help you to finalise the tax obligations of the fund, including CGT and taxable income received by the fund through investment returns or member contributions.

The ATO will then examine the audited accounts and determine whether there are any final tax obligations or refunds due. Any final tax owed can be paid from funds remaining in the SMSF’s accounts.

Approval By The ATO For The Fund To Close

Finally, the ATO will send you a letter stating that your SMSF’s ABN has been cancelled and your SMSF’s record has been closed on the ATO’s system. This letter confirms that you have met all reporting and tax responsibilities, and you can now close the fund’s bank accounts.

Closing an SMSF is a complex task; you should not attempt to do it alone. Please reach out to a licensed adviser if this is something you are contemplating.

Superannuation, Divorce, & Your Options

A relationship breakdown can be a messy, frustrating time fraught with plenty of paperwork. Did you know that your or your partner’s super could be affected?

If you were to split up with your current partner, you may be able to file a legal claim for up to half your superannuation (under certain circumstances).

In all states (bar Western Australia), you don’t need to be married, have kids or even own a house together for your super to be split in a relationship breakdown. The superannuation of both partners is included in the pool of assets to be divided upon the separation.

According to the Federal Attorney General’s website, superannuation can be split either by:

  • an order of the Federal Circuit and Family Court of Australia (or Family Court of Western Australia for married couples in Western Australia); or
  • a superannuation agreement (a financial agreement that deals with a superannuation interest).

The Family Law Act 1975 gives the Family Court the power to deal with the superannuation interests of spouses (including de facto spouses). Superannuation cannot be taken as a cash payment and is usually rolled over to the recipient’s own superannuation account.

These laws were designed to tackle the longstanding issue where one person in a relationship – usually a woman – would have a tiny amount of super relative to her partner.

You don’t have to be married to split your assets potentially.

It applies if you have a child together or have been in a de facto relationship for at least two years. The definition of a de facto relationship under section 4AA of the Family Law Act 1975 is based on whether you were living together in a genuine domestic relationship.

Remember that any split isn’t necessarily half-half.

You can enter into an agreement without going to court, but if you do end up in court, the judge will consider the relevant circumstances, including whether you have kids, direct and indirect financial contributions to the relationship, and the ongoing needs of each party.

Can Minors Have A Superannuation Fund?

You’re likely aware that people can put money into their super until they reach 67 years and probably already do so yourself.

But did you know you can put money into your underage children’s superannuation for them if they are under 18?

Superannuation For Minors

Some superannuation fund providers can have special accounts that can be opened for children under 18.

One of the advantages of doing this early on is that money will accrue in the fund until your child reaches their preservation age, which will help them with their retirement.

Additionally, the compound interest that superannuation funds with as little as $5,000, for example, accumulating at 7% per annum until the child reaches their preservation age, could increase exponentially.

Compound interest on these superannuation funds could assist them year after year with increased gains and profit.

With that previous example of a child’s superannuation fund of $5,000, if that amount of money accrued interest at the 7% per annum interest rate over 55 years, the result could be that that amount in the super fund may total over $200,000.

This idea is not always suited for everyone. The funds to start the super account need to be readily available, and for many people, that might not be an option. If the money is available through other investment opportunities (i.e. a grandparent wishing to leave their grandchildren money), this could be a means through which that money is tucked away, ready for their superannuation.

If you’re looking for a way for your children or grandchildren to be looked after when you are not around, investing in superannuation is an intelligent way to look towards the future.

What About Adult Children? 

After they commence work, adult children should have a superannuation fund established already (through which their employer contributions can be funnelled). However, you might consider adding them to your self-managed super fund as an additional member or trustee.

There are a variety of issues to think about before including adult children in a self-managed super fund.

There are financial benefits to including children in a super fund, such as the increased pool of assets created over time that can allow for greater diversification of assets. Many people may invite their children to join their super fund as it allows them to provide their children with a financial education on how to manage money and appreciate the benefits of super.

For example, adding adult children means the super fund must cater to a wider range of ages, which can present challenges for parties with different needs.

Also, all members of an SMSF fund with a corporate trustee are expected to be actively involved directors of the fund. This means that your children will also be expected to be directors of the fund and will, therefore, play an important role in the fund’s decision-making. Although the children may be happy to leave the fund’s investment arrangements as they are, will they be in the future when their circumstances may change?

The handling of situations listed above should be mapped out before children are invited to join the super fund to avoid arguments or confusion.

Seek further information and advice from your accountant about what we can do for you to get this started.

Receiving Income Through Your SMSF As A Pensioner

One of the best ways to ensure regular, flexible and tax-effective income as a pensioner is through an income stream from your SMSF.

As a member, you can receive an income stream in a reoccurring series of benefit payments from your SMSF.

Income streams from an SMSF are usually account-based, which means that the amount allocated to the pension comes directly from a member’s account. Once an account-based pension commences, there is an ongoing requirement for the trustees of the superannuation fund to ensure the pension standards and laws are met.

Standards that must be met for SMSFs to pay income stream pensions are that:

  • The minimum amount must be paid at least once a year.
  • Once the pension has started, the capital supporting the pension cannot be increased by using contributions or rollover amounts.
  • When a member dies, their pension can only be transferred to a dependent beneficiary if they have any.
  • The capital value of the pension or the income cannot be used as security for borrowing.
  • Before completely changing a pension, you must pay a minimum amount in certain circumstances.
  • Before you partially change a pension, you must ensure sufficient assets to pay the minimum amount.

Once they have satisfied these minimum standards, the pension will be treated as super income stream benefits for tax purposes. The funds may then be able to claim an exemption for the income earned on pension assets. This is known as an exempt current pension income (ECPI).

SMSF trustees may need to amend fund trust deeds to meet the minimum pension standards. You should consult a legal adviser for more information on how to do this.

Records must be kept of pension value at commencement, taxable elements of the pension at commencement, earnings from assets that support the pension and any pension payments made.