THERE are several ways in which tax-deductible contributions can be made - as employer Superannuation Guarantee Charge contributions, as salary sacrifice contributions and as self-employed super contributions.
Q I am working full-time and salary sacrifice extra contributions to an industry superannuation fund over and above the employer compulsory 9 per cent. I am 55 and will retire in May 2014 when I turn 60. My wife is 60 in September 2010; she works part-time and plans to retire in 2014. Is it possible to re-direct my extra salary sacrifice contributions as a super contribution for my wife?
A Salary sacrifice contributions can be made only on behalf of an employee and cannot be made on behalf of an employee's spouse. You should consider raising your salary sacrifice amount to the maximum you can afford. Until 2012 this will be $50,000 and drops to $25,000 from then. Your wife could also salary sacrifice as long as she does not drop her taxable income below the point she would not be paying tax due to the low-income and mature-age workers tax offsets.
Q I am employed by an overseas employer. I work overseas and return to Australia for leave every five weeks. My super fund will not allow me to make self-employed contributions and my employer is also unable to make contributions. The ATO deems me to be an employee and will not allow contributions I make to be included in the deductions section of my tax return. What can I do?
A From what you describe, your current super fund is very restrictive. There are many super funds that allow multiple employers and self-employed super contributions. If you are worried about cost, some of the large industry funds may be suitable and they will accept super contributions from foreign employers for employees working overseas.
To be eligible to claim a tax deduction for self-employed super contributions, your employer must not be making super contributions for you. This includes super contributions made by them to an overseas fund. If they were making contributions you would only qualify as self employed if your employment income was less than 10 per cent of your total assessable income. Employment income includes fringe benefits and salary sacrifice as superannuation.
You may be deemed as an employee because you are showing your employment income in the Australian salary and wage section of your income tax return. As you are earning your income overseas, it can be shown in the foreign income section of your tax return. This should mean an amount can be entered as a self-employed super contribution deduction.
Q My wife and I have a self-managed super fund and would like to know when both of us pass on and leave all the fund's assets to our children, will our SMSF share portfolio be subject to capital gains tax?
A When you die your super fund must cease paying a pension. This means the fund goes from pension to accumulation phase and tax is payable on capital gains at 10 per cent. It can be a good practice for a super fund to regularly realise capital gains for re-investment while the fund is in pension mode. By doing this, the impact of capital gains tax will be lessened upon the death of a member. In addition to the super fund paying tax, your children will also pay tax at 16.5 per cent on superannuation they receive from your SMSF.
