The measure – From 1 July 2017, the Government will allow all individuals to claim a tax deduction for personal contributions to eligible superannuation funds (up to the concessional contributions cap) by abolishing the rule that they couldn’t have more than 10% of their income as employment income. This will apply to:

  • individuals under the age of 65; and
  • those aged 65 to 74, who meet the work test.

Around 800,000 working Australians are expected to benefit from this measure.

[Treasury website – super reforms]

Details from the Treasury Factsheet

The issue – Currently, an income tax deduction for personal superannuation contributions is only available to people who earn less than 10 per cent of their income from salary or wages.

This means those who earn a small amount, but more than 10 per cent, of their income in salary and wages are restricted from receiving tax concessions on their retirement savings. It similarly means that some employees are prevented from fully accessing the tax concessions simply because their employer does not allow them to make pre-tax contributions through salary sacrifice.

This change will allow all individuals under 75 to make concessional superannuation contributions up to
the concessional cap (including those aged 65 to 74 who meet the work test). Individuals who are partially self-employed and partially wage and salary earners — for example contractors — and individuals whose employers do not offer salary sacrifice arrangements, will benefit from these changes.

The details – From 1 July 2017, the Government will allow all Australians under 75 who make personal contributions (including those aged 65 to 74 who meet the work test) to claim an income tax deduction for any personal superannuation contribution into an eligible superannuation fund. These amounts will count towards the individual’s concessional contributions cap, and be subject to 15 per cent contributions tax.

To access the tax deduction, individuals will lodge a notice of their intention to claim the deduction with their superannuation fund or retirement savings provider. Generally, this notice will need to be lodged before they lodge their income tax return. Individuals can choose how much of their contributions to deduct.

Certain untaxed and defined benefit superannuation funds will be prescribed, meaning members will not be eligible to claim a deduction for contributions to these funds. Instead, if a member wishes to claim a deduction, they may choose to make their contribution to another eligible superannuation fund.

This more flexible arrangement will benefit all Australians by allowing them to utilise more of their concessional cap if they have the capacity and choose to do so.

[Treasury Factsheet]