Tax deduction for superannuation contributions

From 1 July 2017, individuals are able to deduct personal contributions and have them treated as concessional contributions.

Currently, individuals are not able to deduct personal contributions for an income year and have them treated as concessional contributions unless the individual satisfied a number of requirements, such as the ‘10% rule’. The 10% rule requires less than 10% of the of the sum of the individual’s assessable income, reportable fringe benefits total and reportable employer superannuation contributions where attributable to employment or similar activities.

This measure removes the requirement of the income tax law that an individual must earn less than 10% of their income from employment related activities for the individual to be able to deduct a personal contribution for superannuation contributions.

The removal of the 10% rule improves the flexibility and fairness of the superannuation system so that more individuals can make personal contributions to superannuation as concessional contributions.

Currently employees and employers have used salary sacrifice arrangements to overcome this inconsistency. By removing this anomaly, it will definitely make the superannuation system more flexible.

This restriction disadvantaged individuals who do not work for employers that allowed them to make salary scarified concessional superannuation contributions or those who are substantially self-employed but received 10% or more of their income from employment. This ensures that individuals receiving employment income are not dependent on whether their employers offer salary sacrifice arrangements should they wish to make contributions to their superannuation from , effectively, their pre-tax income.