The ability for all Australians to make tax-deductible voluntary superannuation contributions is benefiting many self-managed super fund (SMSF) members, says SMSF Association CEO John Maroney.
“The opening up of voluntary superannuation contributions, which took effect on 1 July 2017, will effectively have the same result as employees making salary sacrifice contributions.
“But some employers choose not to allow their employees to salary sacrifice, so this decision by the Government does give employees greater flexibility if they want to contribute more money into their superannuation up to the $25,000 cap.
“For an employee on $100,000 who is getting a Superannuation Guarantee (SG) payment of $9500 annually, it will provide the option of being able to contribute another $15,500 to superannuation at the concessional tax rate.”
Before 1 July, the option of being able to make tax-deductible voluntary superannuation contributions was limited to those individuals who essentially did not get a salary – receiving less than 10 per cent of their annual income in the form of a wage, effectively limiting this option to the self-employed. It was better known as the “10% rule”.
Maroney says that even those individuals who have the option to salary sacrifice may prefer to contribute voluntarily and claim a personal tax deduction instead.
“This gives individuals far more flexibility over the timing and control of their contributions up to the $25,000 cap, as well as being able to utilise catch-up contributions once they begin.
“It also avoids the problem of having to enter into a salary sacrifice agreement with their employer that can involve unforeseen clauses detrimental to the employee’s interests and avoiding the issue of employers either failing to pay or paying late.”