During the June quarter, deductible personal super contributions have been the top query coming from financial advisers, following super reforms allowing more Australians to use this strategy and top up their retirement savings, according to BT Financial Advice’s (BTFA) technical team.
The opportunity to claim a deduction for personal super contributions became available to more people following the 1 July 2017 super reforms, BTFA technical consultant Tim Howard said.
BTFA revealed during April to June, it fielded over 4500 queries from advisers, with deductible contributions being the leading topic.
“More clients are likely looking into this option, given 2017/18 is the first full financial year in which this option has become available to more people, after historically being available only to those who were self-employed,” Howard said.
“The spike in queries for the June quarter is likely as clients are considering super as part of their end-of-financial-year strategies.
“Clients can use this strategy to top up their super contributions before the end of financial year if they remain under the concessional contribution cap limits.”
He said clients are able to contribute, if they choose, $25,000 a year in pre-tax money towards their super, inclusive of the superannuation guarantee and salary sacrifice contributions.
In addition, personal contributions may provide an alternative strategy beyond the salary-sacrificing arrangements available through employers, he said.
“Most importantly, clients who are employed can now claim a deduction for personal contributions if they meet the eligibility criteria,” he noted.
Previously, a 10 per cent maximum earnings test applied to determine if a client could claim a personal deduction for a contribution to super.
This meant clients could only claim a deduction where less than 10 per cent of their income for the year was attributable to salary and wages.
Since 1 July 2017, the 10 per cent maximum earnings test has been removed, meaning clients with appropriate levels of assessable income can claim a tax deduction for a personal super contribution.
Clients aged between 65 and 74 may also be eligible to use this strategy if they meet the work test.
“If clients are considering making personal super contributions as part of their financial strategy, it’s important to keep in mind that all other existing rules and eligibility criteria remain the same,” Howard said.
