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A. What to consider as an employer

Tax deductions for employer contributions

Section: 1.11

1.11 Tax deductions for employer contributions

Employer contributions are tax deductible

Employers can deduct a superannuation contribution made to a complying superannuation fund, or an RSA, for the purpose of providing superannuation benefits for the employee. The employer can deduct the contribution only for the income year in which it is made.

Other conditions in sections 290-70, 290-75 and 290-80 of the Income Tax Assessment Act 1997 (ITAA 1997) must also be satisfied for employer to deduct the contribution.

1. Employment activity conditions

To deduct the contributions, the employee must be:

  • an employee (within the expanded meaning of employee given by section 12 of the Superannuation Guarantee (Administration) Act 1992); or
  • engaged in producing your assessable income; or
  • an Australian resident who is engaged in your business

2. Complying fund conditions

1. If the contribution was to a superannuation fund, at least one of the following conditions must be satisfied:

  • the fund was a complying superannuation fund for the income year of the fund in which the employer made the contribution
  • at the time the employer made the contributions, the employer had reasonable grounds to believe that the fund was a complying superannuation fund for that income year,
  • at or before the time the employer made the contribution, the employer obtained a written statement (given by or on behalf of the trustee of the fund (that the fund:
    • was a resident regulated superannuation fund (within the meaning of the Superannuation Industry (Supervision) Act 1993); and
    • was not subject to a direction under section 63 of that Act (which prevents a fund from accepting employer contributions).

3. Age-related conditions

1. To deduct the contributions, either:

  • employer must have made the contribution on or before the day that is 28 days after the end of the month in which the employee turns 75; or
  • employer must have been required to make the contribution by an industrial award, determination or notional agreement preserving State awards within the meaning given by Schedule 8 to the Workplace Relations Act 1996) that is in force under an Australian Law
  • employer contributions count as superannuation guarantee contribution for the employee

The Super Guarantee Charge

Note that employers who do not pay superannuation guarantee contributions for an employee for a quarter are liable to pay a penalty via the superannuation guarantee charge. When this occurs, the charge is made up of:

  • Interest on the amount (at 10%)
  • An administration fee of $20 per employee, per quarter
  • SG shortfall amounts (this also includes choice liability calculated on employee's salary or wages)

And in addition, the employer loses the ability to claim the payment as a tax deduction.

This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.

Last modified: Friday, June 11, 2021