Business News

Scrapping of 10 pct rule a positive

The scrapping of the 10 per cent rule was one positive change in regard to superannuation that was contained in last week’s federal budget, according to a retirement savings expert.

Previously an individual who carried on a business, but was also engaged as an employee could only claim a tax deduction on their personal superannuation contributions if the assessable income derived from being an employee was less than 10 per cent of their total assessable income.

In order to comply with this condition of the law, individuals in this situation whose assessable income as an employee was in danger of exceeding 10 per cent of their total assessable income would convert a portion of this income into a fringe benefit or salary sacrifice superannuation contribution from their employer.

“The removal of the 10 per cent rule is absolutely fantastic,” PwC private clients director Liz Westover told selfmanagedsuper.

“That’s something the industry has been asking for over many years, so it’s great to finally see it happen.”

While it was a welcome inclusion in this year’s budget, she admitted she had been hoping it would happen rather than expecting it would occur.

“I’ve been asking for it in the budget submissions I’ve been writing for years around the removal of that rule,” she revealed.

“And it makes sense because everyone should have the ability to claim a deduction up to their contribution caps, regardless of their work circumstances.

“It also takes the onus off the employer regarding the salary sacrifice arrangements, which I think is great.”

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