The 10 per cent test prohibits a personal concessional member contribution where the superannuation member earns more than 10 per cent of their income from employment services.
In a LinkedIn forum, F D Browne & Co principal Chris Browne argued that the 10 per cent rule fits the category of a “grossly prejudiced tax law against the relatively small number of taxpayers that it affects”.
“There is no justification for singling this group out as being ineligible for tax concessions which are available to others,” said Mr Browne.
According to Mr Browne, the rule “adversely affects those switching from employment to self-employment or vice-versa within a year”.
“For some it can be very hard to know with any certainty that they have passed the 10 per cent test until after 30 June, by which time it is too late to contribute,” he said.
Financial and Technical Solutions principal Tony Negline expressed a similar view, stating the 10 per cent rule has “achieved very little other than unnecessary complexity”.
“[However,] with the federal Budget under stress I’ll be surprised if the government opens the flood gates on deductibility of super contributions,” said Mr Negline.
Partner at Deloitte Australia Michael Ward said allowing taxpayers to make deductible top up contributions is the first step in giving taxpayers more control over their super.
Superannuation will then be seen with greater relevance by taxpayers, he said.
Meg Heffron, head of customer at Heffron SMSF Solutions, said the test was likely a very crude means of limiting contributions back when limits on contributions were dealt with by limiting the tax deductions available to the contributor rather than imposing a limit on the recipient.
“It’s very clearly unnecessary now that caps are imposed in aggregate at an individual level [and] should have been killed off years ago,” said Ms Heffron.
Agree. Unnecessary red tape. I can’t see any “flood gates” opening seeing as it is a small percentage of people affected.
This is such a pertinent article. The Government does not seem to know its own mind on the matter of superannuation. On the one hand, it claims to encourage people to provide for their retirement. On the other it is terrified of “revenue leakage” through deductible contributions. As other commentators have said, the “10% rule” adds complication and uncertainty to concessional contributions. Why not simply rely on the concessional contribution cap to control the level of contributions, regardless of whether they are made by the employer or the member themselves?
Another area where I have seen this issus bring about unintended consequence is contractors who are employees but are not being treated as employees by their employers – that is, they are not paid SG.
It makes it difficult to give advice to the individual regarding tax deductibility of super contributions where the employer won’t allow salary sacrifice because they are not treating the person as an employee and yet the individual is not eligilble under the less than 10% rule.
The pre 1 July 2007 “unsupported rule” at least alleviated this situation and I see merit in the previous “unsupported” regime compared to the current 290-160 regime
It makes little diference to me,Ive withdrawn my super and intend to close my SMSF because the Government keeps making too many changes,theyve turnes a good system on its head by making a good SMSF into something I cannot be bothered with anymore.
While you’re at it, Joe Hockey, what about extending the work test and the undeducted contributions bring-forward rules from 65 to the ‘new transitional’ age of 67, and then to the proposed ‘final retirement age’ of 70. Yeah right….
This is an area I have been commenting on for years, for exactly the reasons mentioned here. Federal Treasurer Joe Hockey has called for input. Now is the time for us to make that input and ensure the topic is raised. If the Treasurer fails to resolve this matter, he needs to be made to provide his reasons.