Borrowing for Super Contribution - Deductible

Discussion in 'Accounting & Tax' started by H2hickster, 26th Sep, 2019.

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  1. H2hickster

    H2hickster New Member

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    Hi, I am a 51yo full time employed employee and have the std super contribution of 9.25% (I think) paid into my nominated super account. My accountant has suggested I could borrow from my unused LOC to and pay this into my super account, up to the $25k limit. The interest would/could/may be deductible. At retirement, I would pay out the loan from my super.

    I am led to believe borrowing for super was deductible to self employed people/business for a long time, and it has also become available to paid employees in the last year or so? It seems a bit grey to me and I not certain of the validity of this plan. Can anyone provide advice as to whether this a Iegitimate way to increase my invested super balance, and also benefit from a tax deduction on the interest costs of the borrowed funds. Appreciate your thoughts.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Interest would Not deductible unless employer
     
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  3. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    What sort of tax advice is that? Borrowing to pay super is not deductible for an employee. Only for SOME businesses.

    A loan which incurs interest is only deductible to the extent the use of the borrowed money produces assessable income. A super contribution does not do that since the fund is a trust and the TRUST produces income. The member doesnt.
     
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  4. PandS

    PandS Well-Known Member

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    Just salary sacrificed up to 25K limit inclusive of compulsory 9.5% contribution
    you get similar benefits and no grey area
     
  5. Mike A

    Mike A Well-Known Member

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    there is no grey area between claiming a deduction in your personal name and salary sacrificing. in fact salary sacrificing is more difficult as it needs an effective salary sacrifice agreement in place.

    the issue is whether the interest on the loan to make the contribution is deductible.
     
  6. ChrisP73

    ChrisP73 Well-Known Member

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  7. ChrisP73

    ChrisP73 Well-Known Member

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    Also Mrs and I both contribute up to the $25k limit with any personal contribution coming from accumulated cash sitting in offset against deductable debt so is indirectly deductable..

    By contrast bas/GST payments and income tax for sole traders *is* deductable so we never use cash for these, always a line of credit.
     
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  8. H2hickster

    H2hickster New Member

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    Thank you Terry, Paul and others for responding. You have clarified this matter perfectly. Although I would like to boost my super, doing it whilst staying on the right side of the law is imperative. Thank you everyone.
     
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