Prior to the recent budget taking effect, the amount that could be deducted was $3,000 plus 75% of the balance up to the persons age based limit (Maximum Deductible Contribution or MDC). The maximum deductible contributions for the 2001/02 and 2002/03 tax years are:
| Income Year | Under age 35 | Age 35 to 49 | Age 50 and over |
| 2002/2003 | $12,651 | $35,138 | $87,141 |
| 2001/2002 | $11,912 | $33,087 | $82,054 |
Prior to the budget changes kicking in, to get these tax deductions investors would need to contribute the following super contributions such that the deduction equalled $3,000 + 75% of the contribution:
| Income Year | Under age 35 | Age 35 to 49 | Age 50 and over |
| 2002/2003 | $15,868 | $45,851 | $115,188 |
| 2001/2002 | $14,883 | $43,116 | $108,406 |
But following the budget self employed people can claim a tax deduction on $5,000 + 75% of the balance, so the following contributions allow the largest tax deductions post budget:
| Income Year | Under age 35 | Age 35 to 49 | Age 50 and over |
| 2002/2003 | $15,202 | $45,184 | $114,522 |
| 2001/2002 | $14,216 | $42,450 | $107,739 |
The reason why there are age based limits is to stop people taking excessive advantage of the tax breaks while still young. Remember you still have to worry about reasonable benefits limits later on.
These numbers are indexed against AWOTE and is based on a person's age at the date of the last contribution in a given year of income.
As a side note, there is a "loophole", if you could call it that, for people with two employers. A person who is employed by two or more unrelated employers has a MDC with each employer. This means each employer can make contributions for the same person and be entitled to tax deductions. This is especially useful for people with multiple company directorships and people contracting to several employers. - Source: BT Super Book.
Also note that people who have not received employer or spouse contributions for a financial year, such as retirees, people who are not working (eg. on parental leave), employees with no SG liability, and non-residents may be entitled to claim a deduction for personal contributions.
If you have received a spouse or employer contribution for the year you will be automatically disqualified from being able to claim a deduction for the contribution. Also, a question arises as to whether a contribution into a foreign superannuation fund constitute superannuation support. Legislation does not specify the answer, and so payment into a foreign super fund could be construed as superannuation support.
A rule usually applied to determine whether or not you can claim a tax deduction for super contributions is the 10% Rule. If your total income and reportable fringe benefits from employers exceed 10% of your total income you can't claim the deduction. This 10% does not exclude employment outside of Australia.
A person who is employed but meets the 10% rule can exploit the double MDC loophole, claiming tax deductions to his MDC with personal contributions, and the same from employer income. Also, it is possible to salary sacrifice superannuation as a means to reduce employment income so as to meet the 10% rule.
What instead an employee can get is a tax rebate. It isn't quite as generous as a deduction and it won't amount to as big a saving, but is still useful.
Employees are eligible for two types of rebate:
Co-contributions
Note that co-contributions have (as at September 2002) still not been passed in parliament. All sides seem to support co-contributions however the Government has decided to link co-contributions with a proposed lowering in the super contributions surcharge rate, which opposition parties are not as keen on. I think this change will go through, and when it does it should apply retrospectively from 1 July 2002, but in politics anything can happen.
Prior to the 2002/03 budget, there was a completely pathetic rebate of up to $100pa for low income earners who contributed to super. This rebate, which was more the subject of mirth than excitement, has now been replaced by a much more significant benefit, the co-contribution.
In a nutshell, if you are a low income earner and you make a $1,000 personal contribution to super, the government, in the form of the ATO, will match that contribution with another $1,000.
The full co-contribution is available to superannuation supported employees earning less than $20,000pa (including fringe benefits like super), it will be reduced by 8c for each dollar of income higher than that, phasing out completely when income exceeds $32,500.
Eligibility
The co-contribution will be administered by the ATO and paid directly into a taxpayer’s superannuation account. The co-contribution will not be able to be used to offset other ATO liabilities.
Spouse contributions rebate
Only available for a spouse earning less than $13,800 (de facto is ok, but legislation presently does not include same sex couples)
You get this rebate by paying money into your spouse's superannuation. It equals 18% of the amount you contribute up to $3,000 per year, cutting out by a dollar for every dollar your spouse earns above $10,800. In other words it can be up to $540 a year.
The rebate equalls 18% of the lesser of:
For example, if your spouse earns $12,000 a year, and you make a $3,000 contribution, the rebate you will be entitled to claim is 18% x ($3,000 - ($12,000 - $10,800) = $324. If you only contributed $1,500, the rebate would be 18% x $1,500 because $1,500 is less than ($3,000 - ($12,000 - $10,800)) = $1,800.
If your spouse earned less than $10,800, the rebate would equal 18% x the contribution, up to $540. If your spouse earned $15,000, the rebate would be $0.
Spouse contributions can be an important way to get money into super, because it is much easier to qualify to make a spouse contribution. Most of the time people using recontribution strategies use spouse contributions. Non residents can make and receive spouse contributions, provided a few conditions are met, such as the spouse deriving some sort of income in Australia. If either spouse is a non resident, you won't get the tax rebate though.
Advantages
Well, even though on the grander scheme of things those rebates aren't a big deal, there is one more advantage to them. All personal contributions paid for from your net income (rebated or otherwise) become undeducted contributions. This means that they: