As a sole trader you do not have an obligation to contribute money into super each year for yourself, but if you choose to contribute you may be entitled to a tax deduction.
To be eligible to claim a super deduction you need to contribute to a complying super fund and advise your super fund that you intend to claim a tax deduction equal to your super contributions.
Under current laws you also need to ensure that less than 10% of your income for the year comes from salary and wages (the 10% rule). This is tested on a yearly basis, so you can get caught in a situation where your employment income increases at the end of the financial year to the point where it disallows your contributions made earlier.
Pro Tips:
- The easiest way to side-step the 10% issue is to salary sacrifice any wages you have to super. This is a safe way of making sure you get the tax benefit of contributing to super.
- At the recent budget the government announced changes to scrap the 10% rule from 1 July 2017. Until then you will still need to ensure you meet these rules.
Author: Brigette Liddelow
Email: brigette@faj.com.au
