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Super contributions tax concessions

Employer tax deductions for super contributions

Section: 4.3

Employers may claim a tax deduction for 100% of any super contributions made on behalf of employees to a complying super fund. The age-based limits that previously applied were abolished from 1 July 2007. While there is no limit on the amount of contributions which an employer may claim as a tax deduction, an employee is unlikely to want their employer(s) to make contributions in excess of their concessional contributions cap because of the excess tax imposed on the individual.

An employer may claim a 100% tax deduction for super contributions made on behalf of employees either:

  • on or before the day that is 28 days after the end of the month in which the employee turns 75
  • where the contribution reduces the employer's SG charge percentage, or
  • where the employer was required to make the contribution by an Australia law, industrial award, determination or notional agreement preserving State awards that is in force.

Former employees

Employers are able to claim a deduction for contributions made within four months after an individual stops being their employee, provided:

  • The employer would have been entitled to the deduction if the contribution was made at a time the individual was an employee of the employer and either of the following also applies:
    • The contribution is to satisfy the employer's SG obligation in respect of the individual
    • The contribution relates to a one-off payment in lieu of salary or wages that relate to a period during which the individual was an employee.

Controlling interest

A taxpayer may claim a tax deduction for a superannuation contribution made in respect of an individual who is not the taxpayer's employee, but an employee of an entity where the taxpayer has a controlling interest.

Employee

For an employer to deduct a contribution for an employee, the employee must be:

  • An employee within the expanded definition of employee in section 12 of the Superannuation Guarantee (Administration) Act 1992, or
  • Engaged in producing the assessable income of the employer, or
  • An Australian resident who is engaged in the employer's business.

Employers are able to claim a deduction for contributions made on behalf of SG employees who are not engaged in producing the assessable income of the business, nor engaged in the business for the employer but are SG employees for the purpose of the SGAA (eg some directors may fall into this category). However, individuals who are not SG employees will still need to be engaged in producing the assessable income of the business or engaged in the business before a deduction can be claimed.

Limits on deductions for personal services income

An employer cannot deduct a contribution made to a super fund or an RSA for an associates39;s work if the contribution relates to gaining or producing the employer's personal services income (PSI). An associate includes a spouse, business partner or relative of the employer.

However, an employer is permitted to deduct a contribution for work performed by the associate which does not relate to gaining or producing the employer's PSI. In this case, the deduction would be limited to SG contributions.

See ATO ruling TR 2003/10 for further information on tax deductions that relate to personal services income.

Last modified: Friday, August 25, 2017