On 1 July 2017, the rules around claiming a tax deduction on personal contributions changed, making more Australians under 75 years old eligible to claim.

For the first time, when you submit your tax return, you may be able to claim a tax deduction if you’ve made personal contribution from your after-tax income to your super - before 30 June of the financial year you want to claim the deduction.

Among the many changes to super introduced on 1 July 2017 was the removal of the “10% rule”. Under this rule, you could only claim a tax deduction for personal contributions if you earned less than 10% of your income from eligible  employment, which in effect, excluded most employees.

You now no longer need to be self-employed or substantially self-employed to claim a tax-deduction for personal contributions.

Who's eligible?

To be eligible, you must:

  • Make personal after-tax contributions to your super account before 30 June of the financial year you want to claim the deduction (and your super fund will also need to receive the money before 30 June too).
  • Complete a valid Notice of intent to claim or vary a deduction for personal super contributions form to let us know the amount you would like to claim as a deduction before you submit your tax return for the year.
  • Receive a notice from us which acknowledges your intent to claim a deduction.
  • Have an accumulation account with us when you give the form to us.
  • Be under 65, or aged between 65 and 74, and meet the work test (work 40 hours within 30 consecutive days in a financial year). If you are 75 or older you cannot claim a deduction for contributions that were made more than 28 days after the month you turned 75.
  • Be under 18 and have earnt income as an employee or a business operator during the year.

Be careful not to breach the concessional contributions cap

There is a cap of $25,000 for 2018-2019 on the amount of concessional contributions you can make within the year. The concessional contributions cap includes your employer superannuation guarantee contributions, any salary sacrifice  contributions as well as any personal contributions, which you claim a deduction for. Employers and super funds are not responsible for monitoring the cap, so it’s up to you to make sure you do not exceed it.

Salary sacrifice vs claiming a tax deduction on personal contributions

From a tax and super viewpoint, a personal contribution has the same net effect as salary sacrifice, as can be seen below.

Outcome Salary sacrifice Personal deductible contribution
Salary $80,000 $80,000
Salary sacrifice $15,000 -
Personal deductible contributions - $15,000
Taxable income $65,000 $65,000
Tax payable in 17/18 (including Medicare levy) $13,947 $13,947
Concessional contribution (excluding super guarantee)  $15,000 $15,000
Contributions tax $2,250 $2,250

While salary sacrifice can be a great way to build your super, not all employers offer it. And for those working casually or with irregular work patterns, salary sacrifice does not offer the flexibility to alter your contribution amount from pay period to pay period. Now, instead of salary sacrificing, you could make an after tax personal contribution, which is tax deductible.

If you are currently in a salary sacrifice arrangement, you might want to think about whether claiming a tax deduction for personal contributions suits you better. If so, you should talk to your employer about unwinding your salary sacrifice arrangements.

If you’re not sure and would like to discuss the new rules, you can talk to a financial adviser.

I want to claim a tax deduction on a personal contribution. What do I have to do?

If you want to claim a deduction, you will need to:

  1. Complete and send us a valid Notice of intent to claim or vary a deduction for personal super contributions form
  2. Return the completed form to: PO Box 1229, Wollongong NSW 2500 before you lodge your tax return for that financial year.

We will confirm we have received your notice, and you will need this acknowledgement for your next tax return.

Show me how to make a personal contribution