Claim Superannuation as Tax Deduction for 2018

Tax Deduction for Super paid by Employees

Now people who work for salary & wages and make personal superannuation contributions from their after tax wages since July 2017 may be able to claim that amount as a tax deduction.

There is some fine print to be able to do it and it is not the right choice for everyone but consider if it could be a good strategy for your situation.

How it Works

Jo Average is employed as chippie and earns $70,000 as year, before tax. Once the employer has taken tax out, Jo pays $10,000 for the year from her take home pay into super (this bit is important, it has to be your own money, after tax that you have voluntarily added to your super account). It can’t be the compulsory super your employer has to pay in and it can’t be salary sacrifice amounts.

Jo completed a Notice of Intent to Claim and gives it to her super fund on time – the super fund replies via a notice that it has received the form and will take 15% of Jo’s contribution as tax.

When Jo completes her tax return for the year ending 30th June 2018 she gets to claim a tax deduction of $10,000.

What this looks like

Without Claiming Super With Super Deduction
Gross Wages $70,000 $70,000
Less Deductions:
Laundry       150        150
Tax Agent       110        110
Super Deduction $10,000
= Taxable Income $69,740 $59,740
Basic Tax & Medicare Levy $15,607 $12,053
Tax paid in Super Fund $ 1,500
Total Tax Paid $15,607 $13,553

From the basic example above if Jo had chosen to use her $10,000 super contribution as a tax deduction her total tax saving for the year would be $2,054 ($15,607 less $13,553), winning!


But is it a Good Idea?

We have to consider the drawbacks for Jo – her funds have to stay in the super fund until she retires so if that’s a long time until she gets her hands on the cash that might not suit her.  You would also have to think about what else you might be able to do with that cash – like pay off credit cards or pay down your mortgage, these things will also save you money.

You need to talk to your financial advisors about this but if you are not too far off retiring or you have your finances well in hand have a think about if you would be better off with some funds in super rather than with the Taxman.

Do your figures as the higher your income is the higher your average tax rate so the saving between the 15% the super fund will tax compared to the medicare levy & income tax you save increases.

Lastly if after you have considered this from all angles you need to put your plan in place before you get to the end of the financial year – you super contributions have to be in the fund before the close of the financial year and you have to tell the super fund you want to claim it on time as well.

If you would like to disucss this please contact Exact Accounting, your tax and business specialist in Port Lincoln.

Posted in Frequently Asked Questions, Income Tax Returns, Super and tagged , , , .

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