Claim deductions after working test changes

Customers will still need to satisfy the work test if they wish to claim a deduction for a personal contribution despite the removal of the work test for voluntary contributions to superannuation up to age 74.

Talk to money managementTim Howard, technical and regulatory adviser to BT, said one of the main questions he had received from advisers was about the implications of the change in process this financial year for claiming a super personal contribution deduction.

He said customers who said they worked that fiscal year and could claim a deduction would be hit hardest.

“Previously, this [financial] year inclusive, the trustee of the superfund had to be satisfied, so the statement the member signed effectively stated that “yes, I passed the work test this year, so the trustees are therefore able to…accept my contribution”.

“Whereas from next year the trustee of the super fund does not need to verify or need to be satisfied that the client has passed the working test – this is the ATO who must be satisfied that he has passed the work test, to claim the deduction.

“So they’ll still have to file their Section 290 form with the trustee, the trustee will still have to acknowledge that they received that form and intend to claim a deduction for it, they’re still going to have to put the deduction on their tax return.

Essentially, the client would have to declare to the ATO that they passed the working test during this exercise, but they could make the contribution before they passed the working test.

“Whereas right now, you have to pass the work test before making the contribution.

“So it’s a bit of a timing difference there, but the results are sort of the same.

“But because the need to meet the work test has been removed from the superannuation legislation and is now in the income tax law, there is just a small difference as to when this test of work must be satisfied.

“Not before contribution, at any time during the exercise.”

“I think the impact this has is that if a client is not working, they are making a voluntary contribution. First, it will be a non-concessional agreement.

“But then after they make that contribution, they find themselves meeting the work test, and then the opportunity will open up that they can claim a deduction for part of that contribution if they want to, whereas before, if the trustee of the superfund checked compliance with the working test, they could not in fact contribute in the first place, without meeting him.

“So I think that created a bit more flexibility around contributions and around the ability to claim a deduction for those contributions.”

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