Did you know, you may be able to claim a tax deduction on certain super contributions when you do your tax return?
Whether you’re employed, self-employed, or in some instances even unemployed or retired, you may be able to claim a tax deduction on certain after-tax super contributions you’ve made.
These don’t include compulsory SG contributions your employer might be required to make into your super fund under the super guarantee, nor does it include salary sacrifice contributions, which are additional contributions you may get your employer to make into your super fund out of your before-tax income.
How do I make a tax-deductible super contribution?
You can make an after-tax super contribution in a variety of different ways, such as using money from your regular bank account, savings, an inheritance, or from the proceeds of the sale of an asset.
You may then be able to claim a tax deduction on the amount of that contribution when you do your annual tax return.
What are some of the benefits of tax-deductible super contributions?
Putting money into super and claiming it as a tax deduction may be of particular benefit if you receive some extra income that you’d otherwise pay tax on at your personal income tax rate (as this is often higher).
Similarly, if you’ve sold an asset that you have to pay capital gains tax on, you may decide to contribute some or all of that money into super, so you can claim it as a tax deduction. This could reduce or even eliminate the capital gains tax that’s owing altogether.
Meanwhile, there could be further tax benefits as investment earnings made inside the super environment may also benefit from an equivalent tax saving, which could make a difference when you do eventually withdraw your super savings and retire.
What do I need to do to claim a tax deduction on a super contribution?
Make an after-tax contribution to your super
The amount you choose to contribute is up to you but remember the concessional contributions cap is $27,500 per financial year, though you may be able to contribute more if you’re eligible to make catch-up concessional contributions (more on this below).
If you exceed the yearly cap, extra tax may apply to the excess contributions. If you’re an AMP super customer, you can set up notifications in My AMP to let you know when you’re nearing your annual limit.
Lodge a form with your super fund
You’ll need to lodge a notice of intent form with your super fund, which your super fund will acknowledge in writing. If you’re an AMP customer, you can do this by logging into My AMP and selecting the super account you’ve made the contribution to. Click ‘See more’, followed by ‘Claim a tax deduction’.
Also note, you shouldn’t make any withdrawals, rollovers or start drawing a pension from your super before your notice of intent form has been lodged with and acknowledged by your super fund. Doing any of these may reduce or invalidate the tax deduction you’re seeking.
Have the paperwork ready when you do your tax return
Once the financial year is over, you can prepare and lodge your tax return using the written acknowledgement from your super fund that confirms your intention to claim and the amount you can claim.
Remember, you normally have until 31 October to lodge your tax return for the previous financial year, but you may have more time if you use a registered tax agent.
Are there other things that I should keep in mind?
Changes that came into effect on 1 July 2022 mean you don’t need to meet a ‘work test’ before contributing under a salary sacrifice arrangement or making personal contributions. But you do need to meet the work test conditions if you want to claim a tax deduction on personal contributions.
Under the work test you must have worked at least 40 hours over 30 consecutive days in the financial year.
To use the work test exemption, you must satisfy the following conditions:
- you’ve met the work test in the previous financial year
- you haven’t been, and don’t intend to be, gainfully employed for at least 40 hours within 30 consecutive days in the financial year the contributions are made
- your total super balance with all super providers was below $300,000 at 30 June of the previous financial year, and
- you haven’t previously claimed a personal tax deduction under this exemption in any previous financial year.
Under the new rules, the work test can be met in any period in the financial year of the contribution. This is different to the previous rules, where the work test must be met before contributing.
Meanwhile, if you’re under age 18, you can only claim a tax deduction on a super contribution if you’ve earned income as an employee or a business operator during the year.
If you’re claiming a tax deduction for an after-tax super contribution, the contribution will count toward your concessional contributions cap ($27,500 per year).
Note, you may be able to contribute more than this amount if you’re eligible to use unused concessional contribution cap amounts from previous financial years.
It’s also important to note that tax-deductible contributions are not the only contributions that count toward the concessional contributions cap. Other contributions that count towards this cap include:
- Compulsory SG contributions your employer pays under the super guarantee, including contributions from any other jobs you may have held in the same financial year
- Salary sacrifice contributions you may get your employer to make into your super fund out of your before-tax income.
Find out more about super contribution types, limits and benefits.
Other contribution incentives
After-tax super contributions that you claim a tax deduction for will not be eligible for a super co-contribution from the government. Also note, downsizer contributions (which you can make if you’re 60 or over), recontributed COVID-19 early release and First Home Super Saver amounts are not tax deductible.
When you can access super
It’s important to know that the government sets general rules around when you can access your super. Generally, you won’t be able to access this money until you’ve reached your preservation age (which will be between 55 and 60, depending on when you were born) and retire.
Super returns aren’t guaranteed
The value of your investment in super can go up and down. Before making extra contributions, make sure you understand and are comfortable with any potential risks.
Where can I go for more information?
Find out about other ways you can contribute into super.
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Any advice and information is provided by AWM Services Pty Ltd ABN 15 139 353 496, AFSL No. 366121 (AWM Services) and is general in nature. It hasn’t taken your financial or personal circumstances into account. Taxation issues are complex. You should seek professional advice before deciding to act on any information in this article.
It’s important to consider your particular circumstances and read the relevant product disclosure statement, Target Market Determinationor terms and conditions, available from AMP at amp.com.au, or by calling 131 267, before deciding what’s right for you.
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