My clients want to ensure their superannuation contributions are tax deductible this year. When do they need to be paid by to be deductible in the 2019/20 year?
It’s that time of year again – the time when employers and individuals are thinking about tax deductions and superannuation contributions. Tax deductible superannuation contributions can broadly be made by employers and/or individuals.
As a general rule, for contributions to be tax deductible in 2019/20, they must have been received by the superannuation fund by 30 June 2020.
Most employers are required to pay and report their employee’s super contributions electronically via a system called SuperStream. Many will choose to use a “clearing house” to pay their employees super contributions and employers with less than 20 staff or an annual turnover of <$10m can use the ATO’s free Small Business Superannuation Clearing House (SBSCH) service.
Employers need to ensure that contributions are made to their clearing house service provider early enough in June for the contribution to be received by the super funds by 30 June.
If an employee’s fund receives the contribution after 30 June, it would generally not be tax deductible to the employer in the year that it was made to the clearing house – it would be deductible the following year.
This means that employers who make contributions late in June would usually need to check with each employee’s superannuation fund to find out when the contribution was received by that fund before claiming a tax deduction for them (in practice, it is questionable how many employers actually do this).
Fortunately, the ATO have recently issued PCG 2020/6 which provides some relief from that requirement.
In the PCG, the ATO state that they will not apply compliance resources (aka “look the other way”) to consider whether a contribution made by an employer to the SBSCH by close of business on 30 June was received by the trustee of the super fund in the same income year so long as:
That is, employers can now claim a tax deduction in the year the contribution is made to the SBSCH without checking when the fund/s got the money.
Notably, the PCG:
The PCG applies retrospectively, so employers who are yet to lodge their 2018/19 tax returns can rest assured that they don’t need to go through the process of checking with each employee’s super fund on the timing of the receipt of the contributions so long as they met the PCG requirements above.
Individuals making contributions intended to be in 2019/20 for tax deduction and/or contribution cap purposes need to ensure:
Although the context in this article is around tax deductibility, it is worth noting that these timings are also relevant and important for those making non-concessional contributions intended for 2019/20.
Every year we have enquiries regarding late contributions. If you haven’t already, it’s time to contact clients and ensure they leave themselves plenty of time to have everything squared away by close of business on Tuesday, 30 June 2020.
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