Small Business Super Clearing House – Home / How super works / Employer’s guide to super / Claiming tax deductions for your employees’ super: What are the rules?
With the annual Superannuation Guarantee (SG) contribution increasing to 10.5% from 1 July 2022, many employers have been reluctant to pay extra to meet their quarterly employee super contribution obligations.
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But there’s an often-overlooked benefit that comes with an increased SGrate – something your business can claim on its annual tax return.
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So what are the rules for claiming tax deductions for super contributions made on behalf of your employees?
Under current super law, you can claim a tax deduction for the following super contributions on behalf of your eligible employees:
To get the tax deduction, SG contribution payments must be made by your employees to nominated super funds by the quarterly SG contribution due date.
Payments may be made more frequently than quarterly (eg monthly), but the total required SG contribution must be paid before the contribution date to qualify for the tax deduction.
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* If the payment period falls on a weekend or holiday, your contribution must be received by Superfund on or before the next business day.
If you use a clearinghouse to distribute SG contributions to your various employee super funds, your contributions will be deemed paid on the day the super fund receives them, not the day the clearing house receives them from you.
Check when it processes payments to leave enough time for the clearinghouse to transfer payments to Superfund before the quarterly payment deadline.
To claim a tax deduction for wages paid on behalf of your employee, the payment must be made to the employee’s super fund in the financial year you wish to claim.
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If the salary sacrifice contribution for the fourth quarter does not go into Superfund after June 30, you can only make a tax claim in the next financial year.
On the day following the month to which salary sacrifice deductions apply. Thus, he pays the salary sacrifice contribution for August until September 28.
At the end of the 2021-2022 financial year, Jason was able to claim a $13,200 tax deduction on his 2021-2022 business tax return for the 11 months of contributions he paid for Jani during the financial year.
As the June 2022 contribution has not been paid into Yani’s super fund by 28 July 2022, no tax credit will be claimed for that contribution in the 2021-22 financial year. However, Jason can claim a deduction on the company’s 2022-23 tax return.
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If you use the Small Business Superannuation Clearinghouse (SBSCH) and plan to claim tax deductions for SG payments for your employees, it’s important to check the processing times required through the clearinghouse to ensure your payments are processed. activated prematurely.
Payments made through the SBSCH are considered in the income year in which the superfund receives the payment – not the SBSCH. According to the ATO, it can take up to seven working days for SBSCH payments to reach your employee’s super account before being transferred through the ATO and super fund.
To claim a deduction for employee super contributions you made in the 2022–23 financial year, you must allow sufficient processing time for your super payments to be received by employee super funds before the end of each quarterly payment in 2022. -23.
The basic rule for claiming deductions for super contributions is that missed or late payments of super contributions are no longer tax-deductible. Other exceptions to the tax deduction for super payments you make to your employees include:
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If you do not pay your SG contribution in quarterly installments or if you do not pay the full amount, you will be liable to pay the Super Guarantee Charge (SGC). This payment is not eligible for tax deduction.
The SGC consists of the SG deficit amount, interest and administrative charge – none of which is tax-deductible.
These contributions are considered a taxable benefit and you must pay Fringe Benefits Tax (FBT) on them. They must also be included in the employee’s annual salary statement as a reportable benefit.
You may be able to claim a salary sacrifice deduction if you have an effective sacrifice arrangement in place and your employee has written consent to the deduction from wages. The decision must be in the employee’s best interests, be in accordance with the employee’s enterprise agreement, and be permitted by law, a court, a fair work commission or an employee award.
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If the ATO deems the scheme ineffective, the contributions will be treated as wages and salaries and as a personal contribution rather than an employer contribution. This means you are not entitled to a tax deduction for the amount sacrificed and you may have underpaid your SGC contributions, making you liable for SGC.
Employee super contributions must be put into a sufficient super fund or retirement savings account (RSA) or they will be treated as a benefit and you will not be able to claim a tax deduction for them.
The amounts are also subject to FBT and must include the employee’s total wages as reported profit.
If your employee’s contributions go into their SMSF account and you’re not sure if it’s a qualifying super fund, you can use the ATO’s Super Fund Lookuptool to check.
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A personal or non-concessional (after-tax) contribution that you ask an employee to make on your behalf through a pension fund is not claimed as a tax deduction.
The government introduced a one-time SG amnesty for employers in 2020, allowing employers to rectify previous SG non-compliance without penalty.
The six-month amnesty, which ran until 7 September 2020, allowed employers to disclose and pay missing SG contributions for their employees for each quarter from 1 July 1992 to 31 March 2018. 2020.
All information provided is general in nature and does not take into account your personal goals, financial situation or needs. Before you act, you should consider whether all the information is right for you. If it relates to a financial product, you should obtain the relevant product statement (PDS) or seek personal financial advice before making any investment decisions.
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