Nicholas Kohler Director

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October 2017

Newsletter; Super salary sacrifice arrangement changes

From 1 July 2017, the Government has removed the 10% test for the purposes of being eligible to claim a deduction for a personal contribution (the 10% test had previously effectively limited deductible personal superannuation contributions to self-employed people).

This means that it is no longer necessary for employees to salary sacrifice to make extra superannuation contributions.

Advantages of salary sacrificing into superannuation:
• An employer will reduce PAYG withholding after taking into account any amounts salary sacrificed.
• Administration associated with payments being made to the superannuation fund is easier (the “notice of intent to claim a tax deduction” requirements do not apply).

Advantages of personal deductible contributions:
• Additional superannuation contributions do not need to be negotiated with employers.
• Superannuation contributions can be made according to personal circumstances (lump sum contributions are typically made just prior to June 30).
• For small business owners, extra profits can be taken as distributions or drawings instead of higher wages to themselves which can potentially lower PAYG, payroll tax and WorkCover obligations. The drawings can then be contributed as personal deductible contributions.

A combination of both of these strategies may also be implemented.

The $25,000 annual total concessional contribution limit applies to employer contributions (SGC & salary sacrifice) and personal deductible contributions.

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