Maximising Tax Deductions on Super Contributions

The attractiveness of investing through superannuation is now at an all time high. Individuals looking to maximise their super savings, especially those approaching retirement, should look to:

• either salary sacrifice in the case of employees
• or make a tax deductible contribution to a super fund if they are self-employed.

Effective 1 July 2007, a universal limit of $50,000 for deductible contributions to superannuation irrespective of an employee's age. Additionally, employers will be able to claim a deduction on contributions up to age 75. A transitional period will apply until 2012 for those aged 50 and over allowing for deductible contributions to superannuation of up to $100,000. The deductible contributions cap of $50,000 will be indexed to AWOTE in increments of $5,000. The transitional cap of $100,000 will not be indexed. Contributions in excess of the deductible cap will be taxed at the highest marginal tax rate plus Medicare levy and will also count towards the undeducted contribution cap.

A person who is self-employed (or substantially self-employed in that less than 10% of their income comes from outside employment) is entitled to claim a deduction for personal super contributions subject to the same age based limits as for employees.

• The person must still be eligible to contribute to super to use the strategy
• A person does not have to have any self employment income to claim a tax deduction, investment income is acceptable.
• Salary sacrifice can be used to achieve substantially self-employed status (the 10% rule)

See new superannuation rules - revolutionise retirement planning for limits on undeducted contributions to superannuation.

If you would like more information on tax deductions available on super contributions or would like to speak to a financial planner to learn just how you could benefit from making super contributions simply follow this link: Enquiries Desk and mention "Deductible Limits on Super".

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