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Don’t get your super tax deductions wrong!

Key points

  • You need to follow the rules to the letter including telling your super fund in writing that you intend to claim these contributions (and your super fund needs to acknowledge your correspondence in writing too).
  • In a 2013 Super Complaints Tribunal case, a superannuant tried to argue that the super fund had not sent him the proforma letter in order to get out of back taxes.
  • However, it was not the responsibility of the super fund to do so.


Claiming personal super contributions as a tax deduction is an important tax benefit that many people access. However, the mechanics of this deduction aren’t without some twists and turns. It’s amazing how quickly the wheels can fall off, the concession lost and unexpected additional tax and penalty interest can be payable.

The six rules to claim a personal super tax deduction

  1. You’re not employed.
  2. If you’re employed then you satisfy the Maximum Earnings Test which stipulates that less than 10% of your assessable income for income tax purposes, reportable fringe benefits and salary sacrifice contributions has been paid by employers who should have made Super Guarantee contributions for you.
  3. You have told your super fund in writing that you intend to claim these contributions as a tax deduction and they have acknowledged your correspondence in writing.
  4. This documentary process must have been completed before the tax deduction is claimed and within some other specific time limits.
  5. There are strict rules about if, and when, you might be able to change the information you have sent your super fund about claiming the deduction.
  6. Your super contribution tax deduction can’t create a tax loss.

A 2013 Super Complaints Tribunal case on how easily this concession can be lost

In June 2010, the Tax Office told a large super fund member that he wasn’t allowed to claim a $100,000 contribution he had personally made to the fund in the 2007/08 financial year as a tax deduction. (In that financial year, taxpayers aged at least 50 had a concessional contribution cap of $100,000.)

When his tax return was adjusted, he was told he owed the Tax Office just over $50,000 in unpaid tax and penalty interest of $11,319. Ouch … to put it politely!

The ATO stated that the tax deduction wasn’t allowed because the fund member hadn’t told the super fund he was going to claim the contribution as a tax deduction. That is, point three above hadn’t been completed.

The fund member complained to the super fund and said it hadn’t sent him any documentation to enable him to claim the contributions as a tax deduction. He suggested that it should pay the amount now payable to the ATO.

The super fund refused to pay any compensation or acknowledge any failure on its part.

He’d been a member of the super fund since the mid-1980s and for many years had been employed. He became self-employed in 2002 and began making personal contributions to the fund that he claimed as a tax deduction.

The fund member stated that in 2002 he visited the super fund’s offices to make a personal contribution and to tell the fund he was now self-employed. The super fund had a record of the contribution but nothing showing that he had ceased employment and for that reason its computer system said he was employed.

As the Superannuation Complaints Tribunal (SCT) had no documentary evidence that the fund member had told his super fund his work arrangements had changed, it couldn’t determine who was correct.

The SCT said a super fund isn’t obligated to confirm the employment status of its members. One super law demands that super fund trustees chase up employers for unpaid super contributions. The SCT’s written determination for this case doesn’t say if the super fund at any time satisfied this obligation, as it hadn’t received employer super contributions for this member since 2002.

As the super fund’s systems recorded that he was employed it didn’t send him any documentation about claiming his personal contributions as a tax deduction. In the fund’s view, he was employed and therefore wasn’t eligible for this deduction.

It’s unknown if the super fund member exchanged this tax deduction paper work with the super fund at any stage after he became self-employed in previous financial years.

The super fund said that the responsibility to claim the tax deduction lay with the taxpayer. The SCT agreed with this view however it did acknowledge that many large super fund trustees do send pro-forma notices each year to their members so that the personal tax deduction can be claimed.

There are a few themes from this case that I think are important.

1. The initial correspondence about claiming a personal contribution tax deduction is sent by the taxpayer. There is no legal obligation on a super fund to send a pro-forma notice to their members. Many do it as a courtesy and as part of their soft marketing. But the responsibility for the completion of these documents lies with the taxpayer.

2. Clearly the taxpayer didn’t understand the process and that it was his job to make sure paperwork was exchanged between himself and his super fund.

3. The super fund said it didn’t send pro-forma personal super tax deduction notices to the fund member because it believed that he was employed when he had purportedly told them he was self-employed. No large super funds administration systems are fool proof and their data can easily become corrupted. Presumably, the super fund member believed that the fund’s records had remained accurate for about five years. It was this belief that was his undoing. Unfortunately, you need to watch large organisations like a hawk and keep all documentation, as you never know when seemingly unimportant correspondence may become important.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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