Source of deductible contribution key

A superannuation technical specialist has reminded practitioners of the specific characteristics a contribution must possess if a fund member intends to claim a tax deduction for the payment in question.

“One of the [issues] that comes up a lot in relation to concessional contributions is that if I’m claiming a tax deduction for a personal contribution, it has to be [a payment] that I make,” MLC TechConnect technical services senior manager Julie Steed told attendees of a recent technical webinar.

“[The contribution] can’t be from a third party. It also can’t be from someone else’s account and the most common [error] we get is [a payment] from the spouse’s account.

“So if you want to do that, with all of the electronic banking facilities we have now, take it out of [the] spouse’s account, put it into [the account of the member the contribution is for] and then put it into the super fund.”

Steed pointed out this process must now be followed given the increased reliance on electronic banking facilities.

“Super funds have very high visibility as to [which account the contribution] has come from. So [trustees] will know if it’s not an account in [the member’s] name.”

Steed conceded the deduction can be treated as a personal deductible contribution if the originating bank account is in joint names.

She took the opportunity to highlight another common trap people fall into when looking to claim a tax deduction for a personal contribution.

“One thing that we see a lot of errors with is [where] people overestimate the amount of taxable income. And maybe that’s [because] the accountant has done a really good job at identifying deductions to be claimed,” she said.

“But [an individual] can’t claim more in personal deductible contributions than [their] taxable income. And if [they] do, the ATO will deny that deduction.

“[So make sure the client] has sufficient taxable income to cover the amount [they are] claiming [from the personal super contribution].”