By: Denys Smerchanskyi
Announced in the latest federal budget, individuals will soon be allowed (from July 1, 2017) to make additional concessional contributions where they have not reached their concessional contributions cap in previous years.
However access to the unused cap amounts will be limited to individuals with a super balance of less than $500,000.
Amounts are carried forward on a rolling basis for a period of five consecutive years, but under the new measure only unused amounts accrued from July 1, 2017 can be carried forward.
The government says it recognises that annual concessional caps can limit the ability of people with interrupted work patterns to accumulate superannuation balances commensurate with those who do not take breaks from the workforce.
These people would include stay at home parents and/or carers. Allowing them to carry forward their unused concessional cap provides them with the opportunity to “catch up” if they choose, have the capacity, to do so.
The budget announcement indicated that the government intends that the measure will also apply to members of defined benefit schemes, but that it will undertake consultation in this regard.
Personal super contributions will be tax deductible
Also from July 1, 2017 all individuals up to age 75 will be able to claim an income tax deduction for personal superannuation contributions. This effectively allows all individuals, regardless of their employment circumstances, to make concessional super contributions up to the relevant cap.
Beneficiaries of this change include:
- individuals who are partially self-employed and partially wage and salary earners; and
- individuals whose employers do not offer salary sacrifice arrangements.
Currently, there is a “maximum earnings as an employee” condition that needs to be satisfied in order to claim a deduction for personal super contributions. Broadly, less than 10% of the total of a taxpayer’s assessable income, reportable fringe benefits and reportable superannuation contributions may be in relation to an eligible employment activity.
This essentially means that many self-employed professionals who work independently but are deemed employees under the superannuation guarantee law cannot make further voluntary deductible contributions to super. The new budget measure fixes this anomaly.
Source: Taxpayers Australia
