Claiming tax deduction for personal contributions – Everything must be in order – The ATO cannot overlook missing steps.

There are four steps which must be completed to successfully claim a tax deduction for your personal superannuation contributions. If one or more steps are missing or not completed, the Commissioner of Taxation has no discretion to overlook those missing or incomplete steps.

To successfully claim a tax deduction for your personal superannuation contributions made, you must – assuming the contribution is made in respect of the 2024/25 financial year – satisfy the following conditions:

1. Payment contribution

You must make a payment to a superannuation fund during the 2024/25 financial year.

2. Complying superannuation fund condition

The fund must be a complying superannuation fund.

3. Age related condition

At the time you made the contribution you must be aged 18 or more but less than age 67.

If you have attained age 67 or more at the time the contribution is made, you must satisfy the work test of “40 hours/30 days” in respect of the 2024/25 financial year. It does not matter whether you satisfied the work test before or after you have attained age 67 or if the 30-day period straddles your 67th birthday.

The “40 hours/30 days” work test will be satisfied if you have been gainfully employed for 40 hours or more during a period of no more than 30 consecutive days. This period must be entirely within the 2024/25 financial year.

If you have not satisfied the “40 hour/30 day” work test in respect of the 2024/25 financial year, then you may be entitled to claim a tax deduction for your personal contribution if they qualify as “last drinks” deductions. However, you can only use the “last drinks” deduction exception once – if the exception has been applied in respect of contributions made in a previous year, it cannot be used again.

For contributions to qualify as “last drinks” deductions in respect of the 2024/25 financial year:

• you satisfied the gainful employment requirement of “40 hours in 30 consecutive days” in respect of the 2023/24 financial year; and
• your total superannuation balance at 30 June 2023 was less than $300,000.

4. Age 75 requirement

The contribution must be made either before age 75 or made within 28 days of the end of the month in which you attain age 75.

Excluded contributions requirement

The contribution cannot be a re-contribution of amounts previously released under the First Home Super Saver Scheme or the Covid-19 release schemes. Additionally, a contribution which qualifies as a Downsizer Contribution cannot also be claimed as being a deductible personal contribution

Notice of intent requirement – form and timing

You must provide to the trustee of the superannuation fund, to which the contribution was made, notice that you intend to claim a tax deduction in respect of the contribution. The notice must be in an approved form. The notice must also be given by the due date.

The notice must be given to the trustee before you lodge your personal income tax return for the 2024/25 financial year. The notice can be given before, at or after the time the contribution is made and before the end of the 2024/25 financial year. The cut-off date is the date you lodge your income tax return for the 2024/25 year – not the date you are required to lodge the return. If you have not lodged your return for the 2024/25 year by 30 June 2026, you must lodge the notice on or before 30 June 2026.

Notice of intent requirement – validity

To be valid the notice must, amongst other things, be given to the trustee:

• While you are a member of the fund
• While the trustee still holds the contribution
• Before the trustee issues a pension to you which is based in whole or in part on the contribution

These limitations are necessary as the trustee will have taken action which is based upon the contribution being non-concessional. Once the action is taken (eg the contribution rolled over to another superannuation fund) it is not possible for the trustee to change the status of the contribution from non-concessional to concessional. The dye has been set.

Acknowledgment of notice by the trustee

The trustee must issue to you an acknowledgement of the notice of intent to claim a tax deduction. This acknowledgment must be retained to support your claim for the tax deduction.

Insufficient taxable income

The Notice of Intent simply indicates to the trustee that you intend to claim a tax deduction in respect of the contribution and, consequently, the trustee will treat the contribution as a concessional contribution and deduct the expected tax the trustee will now pay in respect of the contribution.

You must still claim a tax deduction in your tax return for the income year in which the contribution was made. If you forget to claim a tax deduction in your income tax return, the trustee will still treat the contribution as a concessional contribution and report the contribution as a non-concessional contribution to the ATO. (In this case you will have to amend the income tax return to claim the deduction).

Even if you claim a tax deduction for the contribution in your tax return, if you have insufficient taxable income against which to offset the contribution, the amount of your tax deduction will be reduced by the amount necessary to reduce your taxable income to zero (a tax deduction for personal superannuation contributions cannot give rise to a tax loss). There is no automatic adjustment to the trustee’s tax treatment of the contribution. Consequently, your contribution will be treated as a concessional contribution but you will not have gained the tax benefit of the deduction.

In this situation you may be able to vary the Notice of Intent to reduce the amount intended to be claimed as a tax deduction to the amount which was actually claimed. This is done by lodging a notice (in approved form and within time) of variation with the trustee.

However, this variation notice must be given to the trustee:

• While you are a member of the fund
• While the trustee still holds the contribution
• Before the trustee issues a pension to you which is based in whole or in part on the contribution.

And the variation notice must be lodged before the income tax return is lodged - so the error must be discovered before or during the process of preparing the tax return and the variation notice must be given to the trustee (and the trustee acknowledge receipt of the variation notice before the income tax return lodged with the revised tax deduction claim).

If the personal tax return is not lodged within the 12 months following the income year in which the contribution was made, the variation notice must be given to the trustee within that 12 months.

What happens if any of the requirements or deadlines are not satisfied?

As outlined previously, the ATO has no power to overlook non-compliance with the various requirements for claiming a tax deduction for personal superannuation contributions, or to grant extensions to the deadlines.

Private Binding Ruling 1052268337540 is a recent reminder of the strictness of the rules relating to claiming tax deductions for personal superannuation contributions. The Ruling was in relation to a situation where the taxpayer made a personal superannuation contribution to a fund with the intention that the taxpayer would claim a personal tax deduction for the contribution. Unfortunately, due to various personal issues, the taxpayer was unable to lodge the Notice of Intention to claim a tax deduction by the due date specified by the legislation.

The Taxpayer contacted the ATO on various occasions explaining the reason for the out of time giving of the notice to the trustee. The Taxpayer claimed that there was an informal practice (support by his accountant) that a notice of intention could be lodged late if the trustee still accepted the notice.

The Ruling was to the effect that the due date for lodging the notice with the trustee was specified in the legislation and neither the trustee receiving the notice nor the ATO could vary that requirement by accepting late notice or disregarding the notice requirement.

The take away is that there must be complete satisfaction of all legislative requirements relating to valid notices of intent to claim a tax deduction for personal superannuation contributions. To quote from the Ruling “The Commissioner of Taxation does not have any discretion or administrative authority to change or disregard the prescribed requirement” …