Beware of $500k limit for catch-up claim rule

There is a new superannuation rule that allows for a catch-up claim of unused concessional contributions but super members must ensure their balance at the end of the prior year is less than $500,000 before making any contributions.

In its August issue of the ‘Super Alert’, BDO wrote that members who did not use the full amount of their concessional contribution cap of $25,000 in a year could carry forward the unused amount and accumulate over a rolling five-year period.

BDO national superannuation leader, Shirley Schaefer, said: “It will provide opportunities to make lump sum contributions of all unused amounts to reduce your taxable income in a future income year”.

The new rule would suit those who did not need to make a concessional contribution in lower income years but anticipated a period in the future which would create significant income, as well as those with fluctuating incomes.

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The super alert also noted the abolition of the 10 per cent assessable income test from 1 July 2017, stating employees were now eligible to claim personal tax deductible super contributions.

Before 1 July, only considerably self-employed taxpayers or taxpayers who had little employment income could make and claim personal tax-deductible super contributions.

This was because of a rule that prohibited employees from claiming a tax deduction for super contributions if 10 per cent or more of their total assessable income came from employment sources.

“This rule has now been abolished so that employees are now eligible to claim personal tax deductible super contributions,” the alert said.

“Employees will have the flexibility to schedule the timing of these contributions to optimise their tax position, when it suits their cash flow to do so.”

The removal of the 10 per cent rule also meant employees would not have to enter into salary sacrifice arrangements with their employers. Effective from 1 July, 2017, employees, like all other taxpayers, can make personal tax deductible super contributions at any time throughout the financial year, right up until 30 June.