The short answer
Many business owners forget their own super contributions are tax deductible. Learn how this strategy can reduce tax and build wealth.
One of the most overlooked tax deductions for business owners is their own superannuation. Owners pay super for staff but often forget themselves, especially sole traders and owners who pay themselves through dividends. Personal super contributions are generally tax deductible up to the concessional cap, so contributing can cut your tax bill and build retirement wealth at the same time.
How do personal super contributions reduce tax?
Concessional (before-tax) contributions are taxed at 15% in your super fund rather than at your marginal rate, which can be 30% to 45% for many business owners. The concessional cap is $30,000 a year, which includes any super your business pays for you. If you contribute personally, you need to lodge a notice of intent to claim a deduction with your fund before you lodge your tax return.
If your total super balance is under $500,000, you may also be able to use unused cap amounts from the previous five years.
Who misses out most?
Sole traders: no employer is paying super for you.
Company owners paid by dividends: dividends don’t attract super.
Owners on a low wage: 12% super guarantee on a small wage leaves room under the cap.
What other deductions are often missed?
Home office costs if you work from home for the business
Vehicle expenses for business use, with a logbook
Subscriptions and professional memberships
Instant asset write-off for eligible equipment, where available
Prepaid expenses, in some cases, before 30 June
Bad debts written off before year-end
Each has rules, so check with your accountant.
A typical Melbourne scenario
Daniel is a Hawthorn IT consultant running a company and paying himself mostly through dividends. His company paid $8,000 of super on his small wage. Before 30 June, his accountant suggested an extra $22,000 concessional contribution, bringing him to the $30,000 cap. Taxed at 15% in super instead of his marginal rate, it saved several thousand dollars in tax and boosted his retirement savings.
Key takeaways
Your own super is one of the most overlooked deductions.
Concessional contributions are capped at $30,000 a year.
Lodge a notice of intent with your fund before claiming.
Plan contributions before 30 June with your accountant.
General information only. Talk to your accountant or financial adviser about your circumstances.
Read tax saving strategies for small business owners and see our tax planning and SMSF services.
Oz calls accounting "the great art", and his clients would agree. A CPA member and Xero specialist, he joined Elephant to provide a more holistic service that covers every base of building wealth. He believes long-term relationships are the only way to get clients real results. When he's not at his desk, he's at the gym, on his bike, or fishing - ideally all three.
