Prior to 1 July 2017 an individual could (under certain conditions), claim a deduction for personal super contributions. One of those conditions is the “10% test” – less than 10% of their income was scoured from wages or salary.
This meant that predominately only self-employed taxpayers were eligible to claim a deduction for any personal super contributions they made.
From 1 July 2017, the 10% test has been removed. This means most working people under 75 years of age can now claim a tax deduction for their personal super contributions.
1) You made the contribution to a complying super fund or a retirement savings account:
Any super contribution to a Commonwealth public sector superannuation scheme in which you have a defined benefit, will not be eligible.
2) You meet the age restrictions:
If you are aged 75 years or older, you can only claim a deduction for contributions you made before the 28th day of the month following the month in which you turned 75. If you are under 18 years old at the end of the income year in which you made the contribution, you can only claim a deduction for your personal super contributions if you also earned income as an employee or a business operator during the year. If you are aged 65 to 74 you need satisfy a work test in the financial year in which the contribution is made. To satisfy the work test you must work at least 40 hours during a consecutive 30-day period during the financial year.
3) You have given your fund a Notice of intent to claim or vary a deduction for personal contributions form:
Eligible taxpayers will need to notify their fund in writing of the amount they intend to claim as a deduction and their fund must then provide a written acknowledgement of their notice of intent to claim a deduction. This all needs to be done prior to the lodgement of the tax return in which the deduction is claimed.
The personal super contributions that you claim as a deduction will count towards your concessional contributions cap, which for the 2017-2018 year is $25,000. When deciding whether to claim a deduction for super contributions you should consider the superannuation impacts that may arise from this. If you exceed your cap you will have to pay additional tax and any excess concessional contributions will count towards your non-concessional contributions cap.
A fact sheet has been released by the ATO (Australian Taxation Office) in relation to employer superannuation guarantee obligations explaining its compliance and penalty approach, which was set out in the Superannuation Guarantee (Administration) Act 1992 (SGA Act).
The ATO explained that this approach will apply to employers who are unwilling or unable to meet their superannuation guarantee obligations, including late payment, under-payment or non-payment of SG contributions to eligible employees.
Employers are required to pay super to any eligible employee who earns $450 or more (before tax) in a calendar month. The super guarantee contribution, which must be paid to a complying super fund or retirement savings account, is currently 9.5% of an employee’s ordinary time earnings and is the minimum amount of super that must be paid.
In addition, the ATO added that contractors that are paid mainly for their labour are employees for SG purposes, even if the contractor quotes an Australian Business Number (ABN). Super contributions for these contractors must be made by employers if they are paid:
If employers do not pay the minimum amount of SG by the due date for an employee, they would be liable for the super guarantee charge (SGC), which comprises of:
SGC is not a deductible expense.
Additional penalties and charges may include the following:
Moreover, a company director who fails to meet SGC liability in full by the due date becomes personally liable for the penalty which is equivalent to the unpaid amount. The fact sheet provides compliance examples and the type of behaviour that will attract closer scrutiny from the ATO and mitigating factors that may be taken into consideration in determining the level and type of penalties that will be imposed.
During the conference held last February, Deputy Commissioner of Superannuation James O’Halloran discussed the changes and other plans that the ATO has set out for Self-Managed Superfunds (SMSFs).
The commissioner opened his statement by assuring that the ATO will continue to support SMSFs, not only by providing ongoing certainty and practical support but also by progressively and sensibly seeking to ensure that SMSFs comply with the law. He reminded SMSF holders that they can now view details of all their super accounts reported through the ATO via the online MyGov site. Included in the information that can be viewed are account balances and insurance indicators, total super balance and the status of bring-forward arrangements relating to non-concessional contributions.
Mr. O’Halloran confirmed that from 01 July 2018, SMSF event based-reporting (EBR) will be limited to SMSFs that have members with total superannuation account balances with a minimum of $1 million. This means that SMSF members whose total superannuation balance are under $1 million can choose to report events which impact their members transfer balances at the same time that the SMSF lodges its annual return.
On 22 August 2017, Mr O’Halloran said they issued a public position about SMSF event-based reporting. The feedback highlights concerns about the cost and effort that may be associated with the proposed approach. He stated that the ATO has listened to all the feedback and have decided to provide annual reporting for SMSFs with members that have lower superannuation balances and to permit a quarterly reporting timeframe for other SMSFs. The ATO will continue to evaluate the risks and benefits arising from this change to SMSF event-based reporting.
Mr O’Halloran reiterated the importance of SMSF lodgement and said it’s a cornerstone obligation for any trustee in a properly operating SMSF. Even if a SMSF trustee uses a tax agent, trustees themselves are responsible for their SMSF and there is still the requirement to lodge even if the SMSF is in pension phase.
One of the projects for this financial year is to target those SMSFs who have not lodged for some time. The ATO is seeking to reduce the level of long term outstanding lodgements. As identified, some 12,000 SMSFs (linked to 5,000 agents) have never lodged an SMSF annual return or had more than two years of overdue lodgements. Nearly 3,000 agents relating to over 8,600 funds have been contacted to gather reasons and information for the non- lodgement of returns, with a view to secure lodgements or to wind up the fund. The ATO will continue to work on this into the 2018-2019 financial year.
In relation to the 2016/17 lodgement of the SMSF annual return, the ATO has granted a deferral of all SMSF lodgements until 30 June 2018. This applies to the due date for payment of any relevant 2017 financial year income tax liability. As 30 June 2018 is a Saturday, trustees have until the next business day to lodge a return with an election for transitional GST relief as part of the super changes that came into effect 01 July 2017, or amend a lodged 2016/2017 return in order to include an election if one wasn’t made.
Sources: Australian Taxation Office