Changes to the rules governing the definition of an employee for taxation purposes within super may impact the ability of individuals to claim a tax deduction for their personal retirement savings contributions, according to super specialist firm Heffron.
The definition of employee now contained in the Superannuation Guarantee (Administration) Act (SGAA) dictates that an individual is no longer considered not to be an employee simply because he or she is not eligible for the superannuation guarantee (SG).
It is a trap Heffron believes all superannuation professionals should be aware of when servicing their clients.
"This is quite different to the system that applied before 1 July 2007. Under the previous legislation, anyone not entitled to SG support was automatically eligible to claim a tax deduction for their personal contributions," Heffron said.
"Now, individuals who are ineligible for SG but are nonetheless employees must meet the second limb of the test - the 10 per cent test," the superannuation specialists said.
The 10 per cent test dictates individuals can claim a tax deduction for personal superannuation contributions if they are engaged in work activities but the remuneration they derive from these activities is less than 10 per cent of their assessable income, reportable fringe benefits and reportable employer superannuation contributions.
The Australian Taxation Office provided guidance on the rules governing the tax deductibility of personal superannuation contributions earlier this year in Tax Ruling 2010/1 - a resource Heffron considers most useful for superannuation advisers.
In particular, Heffron feels its coverage of the 10 per cent rule and how it now works is noteworthy.
