By avoiding to fall for any common traps or tricks, personal tax deductions on personal super contributions may be easier to claim due to changing rules in superannuation.
Anyone who makes personal superannuation contributions made on or after 1 July 2017 no longer has to follow 10% earnings rule which requires you to earn less than 10% of your income from employment (or not have been employed during the financial year) to be eligible to claim a tax deduction.
This means tax deductions may be accessible to people who earn 10% or more of their income from employment for the first time.
The eligibility of claiming a tax deduction is available to anyone who:
- Is under the age of 75; and
- Is eligible to contribute to superannuation; and
- Has room left in their concessional contributions cap; and
- Has enough assessable income to be able to use the tax deduction.
Claiming a tax deduction for personal superannuation contributions may allow clients to reduce their taxable income as well as provide a tax effective way to fund insurance within super, contribute to super where salary sacrifice is not available, save for a first home deposit and make in-specie contributions of direct shares into SMSFs.
Tax deductions on personal contributions are ineligible if it is:
- A downsizer contribution;
- A CGT exempt amount which is required under the small business retirement exemption;
- Made to a Commonwealth public sector superannuation scheme where you have a defined benefit interest;
- Made to an untaxed fund;
- Made by a minor unless the minor derives income from employment or carrying on a business;