If you’ve made or are making an after-tax contribution into your super, you may be able to claim a tax deduction at tax time.

Did you know, most working Aussies can claim a tax deduction on after-tax super contributions they’ve made (such as when you transfer funds from your bank account into your super fund)? 

A couple of years back, only the self-employed, unemployed, retirees, or those who earned less than 10% of their income as an employee, could claim a tax deduction on an after-tax super contribution, but now it’s an opportunity a lot more people can take advantage of if they choose to.

How do tax-deductible super contributions work and what are the benefits?

You can make an after-tax super contribution a variety of ways, such as using money from your regular bank account, savings, an inheritance, or from the proceeds of the sale of an asset.

You can then claim a tax deduction on the amount of that contribution in your tax return, which may be beneficial as these contributions will only be taxed at 15% if you earn under $250,000 a year, or 30% if you earn $250,000 or more a year, which is often lower than what most people pay on their taxable income.

In addition, there could be further tax benefits as investment earnings made inside the super environment also benefit from an equivalent tax saving, which could make a big difference when you do eventually withdraw your super savings and retire.

Putting money into super and claiming it as a tax deduction is of particular benefit if you receive some extra money that you’d otherwise pay tax on at your full marginal tax rate. Likewise, 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, which could reduce or even eliminate the capital gains tax that’s owing altogether.

What do I need to do to claim a tax deduction on a super contribution?

If you’d like to benefit from a tax deduction on your personal after-tax super contributions, you’ll need to:

Make an after-tax contribution to your super

The amount you choose to contribute is up to you, but remember you cannot contribute more than $25,000 per year under the concessional contributions cap – or penalties will apply. If you’re an AMP super customer, you can set up notifications in My AMP to let you know when you’re nearing your 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. Then click ‘See more’, followed by ‘Claim a tax deduction’.

Also note, you shouldn’t make any withdrawals or start drawing a pension from your super before your notice of intent form has been lodged with your super fund.

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?

Your age

Anyone who’s eligible to contribute to super can claim a tax deduction on their after-tax contributions but those aged 67 or over need to meet a work testbefore being able to make voluntary super contributions, meaning they must’ve been gainfully employed during the financial year for at least 40 hours over a period of no more than 30 consecutive days. Meanwhile, those under 18 can only claim a tax deduction on a super contribution if they’ve earned income as an employee or a business operator during the year.

Contribution limits

If you’re claiming a tax deduction for an after-tax super contribution, the contribution will count towards your concessional contributions cap ($25,000 per year). If you exceed this, penalties will apply. Note, from 1 July 2019, your concessional contribution cap may be higher than $25,000 if you’re eligible to use unused concessional contribution cap amounts that you have carried forward from previous years.

It’s also important to note that personal tax-deductible contributions are not the only contributions that count toward this cap. Other contributions include:

  • Compulsory contributions paid by your employer under the Superannuation Guarantee
  • Contributions from any other jobs you may have held in the same financial year
  • Salary sacrifice contributions
  • Notional taxed contributions if you’re a member of a defined benefit fund.

Other contribution incentives

After-tax super contributions that you claim a tax deduction on will not be eligible for a super co-contribution from the government. Also note, downsizing contributions are not tax deductible.

When you can access super

It’s important to know that the government sets rules about 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 the ages of 55 and 60 depending on when you were born) and you 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 to go for more information

Consider what’s right for you and whether you should talk to your financial adviser. If you don’t have an adviser but would like some advice, call AMP on 131 267 or use our find an adviser search function.

For further insights, read about other ways you can contribute to your super.

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