Clients are still going to need to meet the work test if they want to claim a deduction for a personal contribution despite the removal of the work test for voluntary contributions up to age 74.
Speaking to Money Management, Tim Howard, BT advice technical and regulatory, said one of the main questions he had been receiving from advisers was about the implications of the change in process from this financial year to next around claiming a deduction for personal super contribution.
He said clients who had declared to have worked this financial year and were able to claim a deduction would be impacted most.
“Now previously, this [financial] year inclusive, the trustee of the superfund had to be satisfied so the declaration that the member was signing, effectively stated that ‘yes, I’ve met the work test this year so the trustees therefore able to… accept my contribution’.
“Whereas from next year, the trustee of the super fund doesn’t need to check or doesn’t need to be satisfied the client’s met the work test – it’s the ATO that needs to be satisfied that they’ve met the work test, in order to claim the deduction.
“So they’re still going to need to lodge their Section 290 form with the trustee, the trustee is still going to need to acknowledge that they’ve received that form and the intent to claim a deduction for it, they’re still going to have to put the deduction in their tax return.”
In essence, the client would need to declare to the ATO that they had met the work test this financial year but they could make the contribution before meeting the work test.
“Whereas at the moment, you need to meet the work test before making the contribution.
“So it’s a bit of a timing difference there but the outcomes are sort of the same.
“But because the need to meet the work test has moved from the superannuation legislation, and is now in the income tax legislation, there’s just a little bit of a difference around when that work test has to be met.
“Not before the contribution, just anytime in the financial year.”
“I think the impact it makes is that if a client isn’t working, they make a voluntary contribution. It’s going to be a non-concessional in the first instance.
“But then after making that contribution, they find themselves meeting the work test, then the opportunity will open up that they can claim a deduction for part of that contribution if they wish, whereas previously whether the superfund trustee was checking compliance with the work test, they actually couldn’t contribute in the first instance, without meeting it.
“So I think it created a bit more flexibility around contributions and around the ability to claim a deduction for those contributions.”
