Tax Deductions for Superannuation Contributions

All Australians aged under 67 (and those between 67 and 75 who meet an additional eligibility requirement) are eligible to make personal contributions to superannuation and claim a tax deduction for these contributions.  This provides significant taxation and retirement planning opportunities for many individuals.

It is extremely important to keep in mind that the standard annual cap for contributions where tax deductions are claimed (referred to as concessional contributions) is $27,500 and that this cap also includes employer contributions (both legislated Superannuation Guarantee contributions, as well as those additional contributions arranged via a salary sacrifice agreement).  For some individuals, their cap will be higher than the standard amount depending on their individual circumstances.

Case Study

The following case study highlights the potential benefit of taking advantage of ‘concessional’ (tax deductible) superannuation contributions:

Laura is 54 years of age.  She is employed full-time as a secondary school teacher.  Her annual salary package is $110,500.  This is comprised of $100,000 salary and $10,500 of employer superannuation guarantee contributions (SGC).

Laura wishes to use $10,000 of surplus cash currently held within her bank account to add to her retirement savings on or before 30 June 2023.  If she elects to make this $10,000 superannuation contribution a personal concessional contribution, she would benefit from the following:

  • Although 15% contributions tax will be deducted from the $10,000 contribution, Laura will still have $8,500 added to her retirement savings after the deduction of contributions tax;
  • Upon lodging her 2022/23 tax return Laura can claim this $10,000 personal concessional superannuation contribution as a tax deductible expense on her personal tax return;
  • As Laura’s personal marginal tax rate is 34.5% (including the medicare levy), this will represent a personal tax saving of $3,450;
  • After taking into account the contributions tax deducted from the personal concessional superannuation contribution of $1,500 within her superannuation fund, the net tax saving for Laura is $1,950 (i.e. $3,450 personal tax saving in own name, less $1,500 contributions tax paid within super);
  • Laura’s total concessional contributions for the year will be $10,500 (SGC) plus $10,000 = $20,500. As such, she remains under her concessional contribution cap of $27,500 for the 2022/23 financial year.

Depending on your circumstances, you could potentially benefit from financial year end superannuation contributions (have you read our other articles about the Government Co-Contribution and Spouse Contribution Tax Offset?). 

If you would like to arrange a meeting to discuss your circumstances, and how you could benefit from financial year end planning, we encourage you to touch base with us.

The above information represents general advice only and has been prepared without taking into account your personal objectives, financial situation or needs.  Before acting on any general advice you should consider whether or not it is appropriate in regard to your personal objectives, financial situation and needs.