In the lead up to 30 June 2009, business owners should consider topping up their superannuation by making either tax deductible and/or undeducted contributions.       

Tax deductible contributions

The maximum tax deductible superannuation contributions (which includes both super guarantee and salary sacrifice amounts) that can be claimed for the 2008/09 year by employers on behalf of employees is:

• Employees below 50 years of age at 30 June: $50,000
• Employees aged 50 and over at 30 June: $100,000

These contribution limits apply equally to self-employed taxpayers who can claim a 100 per cent deduction where less than 10 per cent of the taxpayer’s total assessable income and reportable fringe benefits is from any employment income.

Note that employer and self-employed superannuation contributions need to be made before the person reaches the age of 75. 

In order to obtain a deduction in the 2009 financial year, the contribution must to be received by the superannuation fund by 30 June 2009.

Business owners should look to making the maximum deductible contributions by 30 June 2009 given that the above contribution limits have been halved from 1 July 2009 as announced in the recent Federal Budget.

Undeducted contributions

Individuals who are under the age of 75 are entitled to contribute up to $150,000 per annum in undeducted or after-tax contributions for the 2008/09 year.

There is also a three-year averaging rule which allows individuals under the age of 65 at any time during the financial year to make an undeducted contribution of up to $450,000 by 30 June. In other words, they can utilise the $150,000 cap for the current year and the next two financial years.

In these circumstances, the individual cannot make any further undeducted contributions in the 2009/10 and 2010/11 financial years.

Where the individual is aged 65 to 74, there is a work test must be satisfied before an undeducted contribution can be made. This test requires that the person be gainfully employed on at least a part time basis during the financial year and must work for at least 40 hours during a consecutive 30-day period in that financial year.

Super co-contribution 

Individuals, including self employed business owners, who make an undeducted contribution of up to $1,000 are eligible to receive a co-contribution payment from the Government of up to $1,500 for the 2008/09 year. 

However all of the following conditions need to be satisfied in order to be eligible for the co-contribution this financial year:  

• The personal superannuation contribution is made by 30 June 2009 to a complying superannuation fund or retirement savings account.
• A tax deduction is not claimed for the contribution.
• The person’s total income is below the income threshold for the 2008/09 year of $60,342. Total income is worked out by adding assessable income and reportable fringe benefits minus “business income” deductions. This means that self-employed taxpayers with high turnovers/low margins may still receive a co-contribution.
• 10 per cent or more of the person’s total income is from running a business, eligible employment or a combination of both. Note that business deductions are not included in the 10 per cent test.
• The person must lodge a tax return for the income year.
• The person is less than 71 years old at the end of the income year.

To receive the maximum co-contribution of $1,500 for the 2008/09 year, the taxpayer’s total assessable income (including reportable fringe benefits) must be less than $30,342 and a contribution of $1,000 needs to be made. The co-contribution of $1,500 reduces by five cents for every $1 of assessable income over $30,342 and cuts out at $60,342.