Save
What are some common errors trustees make when claiming deductions for super contributions?
Save
What are some common errors trustees make when claiming deductions for super contributions?
There are two types of deductible contributions that are made to a superannuation fund. Those made by employers and those made by fund members for their own benefit.
What are some common errors trustees make when claiming deductions for super contributions?
There are two types of deductible contributions that are made to a superannuation fund. Those made by employers and those made by fund members for their own benefit.
One of the biggest errors made when making deductible superannuation contributions is to not have a contribution plan. The failure to plan can not only result in you failing to accumulate the wealth that you are entitled to under the legislation, but also in you incurring hefty income tax penalties.
One example of this is: if you are making a deductible self-funded superannuation contribution to a fund, the amount that you can claim as a deduction is generally limited to your assessable income after claiming all of your tax deductions.
So if you want to make the following non-concessional and deductible self-funded contributions in the next two years, you need to ensure that those contributions are made in a way that does not exceed the concessional and non-concessional superannuation contribution caps.
So you make the following contributions:
2015 Financial Year
Deductible contributions $30,000
Non-Concessional Contributions $180,000
2016 Financial Year
Deductible Contributions $30,000
Non-Concessional Contribution $540,000
What you haven’t considered in the 2015 year is that your assessable income for that year is only $10,000 for the year. This means that the maximum amount that you can claim as a deduction is now limited to $10,000.
So what happens to the other $20,000 that you have contributed as a concessional contribution? Because your assessable income is only $10,000, you are limited to making a concessional (deductible) contribution of $10,000. This means that the remaining $20,000 will be treated as a non-concessional contribution which, taken in conjunction with the $180,000 in non-concessional contributions already made for the year, means you now have non-concessional contributions of $200,000.
This has the effect of triggering the bring-forward rule for non-concessional contributions. This means that you are only able to make a non-concessional contribution in $340,000 in the 2016 year, when I had initially intended to contribution $540,000.
The non-concessional contribution caps allow you to make a non-concessional contribution of six times the concessional contribution cap in any one financial year, currently $180,000. Or alternatively, if you are under the age of 65 at any time during the financial year in which you use the non-concessional bring-forward rule, you can contribute no more than three times the non-concessional contribution cap over the following three financial years – currently a total of $540,000.
In addition to making sure that you have a robust contribution plan in place to build your wealth, you also need to make sure you are completing all your paperwork correctly.
If you are claiming a tax deduction for superannuation contributions that you personally make to superannuation fund, you need to ensure that you complete a Section 290-170 notice and provide it to the trustee of the fund within the permitted time frames. This notice informs the trustee of the fund that you are intending to claim a tax deduction for your contribution and puts the trustee on notice that income tax will need to be withheld from that contribution.
If that notice is not provided to the trustee on a timely basis, or you do things with regard to your benefit before providing the trustee with the notice, you may find that you are unable to claim a tax deduction for the contribution.
Some of the situations that may result in you losing your ability to claim a deduction for your personal superannuation contributions include:
• You commence a pension from the superannuation account to which you make the contribution, without first lodging the notice stating that you intend to claim a tax deduction.
• You roll your benefits out of the fund to which you made the contribution, before you lodged the Section 290-170 notice.
• You split a contribution with your spouse prior to lodging the notice.
• You make a lump sum withdrawal from the account to which you contributed without lodging the notice first.
It is not surprising that as fund members move to retirement, that decisions about whether to commence a pension or roll a benefit to another fund are made quickly. What you need to ensure is that you have completed all of the necessary paperwork first, or you may find that your contribution is at best only partially deductible.
Mark Wilkinson, director, Wilkinson Super
Tax saving
How are Australians planning on spending their tax savings?
Essential bills, savings accounts, Christmas gifts and exchange-traded funds appear to be the big winners from the latest round of tax cuts, new research has revealed. ...Read more
Tax saving
First in the world: SA imposes EV tax
The South Australian government is the first government in the world to introduce an electronic vehicles tax following an announcement by the treasury. ...Read more
Tax saving
5 tips as tax deadline looms
Australians are being warned that they have just two weeks left to get their finances in order if they have not posted a tax return yet. ...Read more
Tax saving
ATO warns businesses of JobKeeper scam
The ATO is warning the community about a JobKeeper scam which is asking members to enter personal information. ...Read more
Tax saving
Why fast-tracking tax cuts won’t stimulate the economy
Treasurer Josh Frydenberg has flagged that previously legislated tax cuts could be moved forward in a bid to help stimulate the Australian economy. ...Read more
Tax saving
Last-minute items to check off before 30 June
With the end of the financial year almost here, an accounting firm has outlined key changes with tax returns this year and flagged some last-minute tax strategies to consider before 30 June. ...Read more
Tax saving
Australia’s richest owe the Tax Office $772m
Australia’s elites and private companies fell $772 million in taxes due to miscalculations and deliberate tax avoidance, the Australian Taxation Office has revealed. ...Read more
Tax saving
Do you have to pay taxes on a trust?
Trusts are usually set up for business, estate planning and investment purposes to separate the legal and beneficial ownership of assets held within the structure. ...Read more
Tax saving
How are Australians planning on spending their tax savings?
Essential bills, savings accounts, Christmas gifts and exchange-traded funds appear to be the big winners from the latest round of tax cuts, new research has revealed. ...Read more
Tax saving
First in the world: SA imposes EV tax
The South Australian government is the first government in the world to introduce an electronic vehicles tax following an announcement by the treasury. ...Read more
Tax saving
5 tips as tax deadline looms
Australians are being warned that they have just two weeks left to get their finances in order if they have not posted a tax return yet. ...Read more
Tax saving
ATO warns businesses of JobKeeper scam
The ATO is warning the community about a JobKeeper scam which is asking members to enter personal information. ...Read more
Tax saving
Why fast-tracking tax cuts won’t stimulate the economy
Treasurer Josh Frydenberg has flagged that previously legislated tax cuts could be moved forward in a bid to help stimulate the Australian economy. ...Read more
Tax saving
Last-minute items to check off before 30 June
With the end of the financial year almost here, an accounting firm has outlined key changes with tax returns this year and flagged some last-minute tax strategies to consider before 30 June. ...Read more
Tax saving
Australia’s richest owe the Tax Office $772m
Australia’s elites and private companies fell $772 million in taxes due to miscalculations and deliberate tax avoidance, the Australian Taxation Office has revealed. ...Read more
Tax saving
Do you have to pay taxes on a trust?
Trusts are usually set up for business, estate planning and investment purposes to separate the legal and beneficial ownership of assets held within the structure. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
