Super contributions and Director fee Question

Posted On: Wednesday, October 31, 2018

QUESTION

My question is about Super contributions & Director fees.

Super contribution: - My accountant has suggested we salary sacrifice contributions to the super limit of 25,000. Can I make the personal contribution of $25,000 direct into SMSF account as we use a family trust (my husband is a director - he does not work in the business) to operate the business? We use another family trust (myself is a director- I work in the business) to own the property.

Will this save me having to pay more workers compo? Am I just required to complete the” notice of intent to claim or vary deductions for personal super contributions " and send it to the SMSF so it is received by SMSF before 30/6 each year?

Director Fees: - Can my husband be paid for Director fees when the resolution is passed close to the end of each financial year, and the fees are paid the next each financial year. My husband is liable for PAYG tax & super guarantee the next financial year. Could we claim the directors’ fees as the current financial year deductions?

ANSWER

I would be guided by your Accountant and make the contribution by way of salary sacrifice. This deals with the statutory superannuation (Super Guarantee) on the director’s fees and ensures that the total contributions stay under the $25k limit.

It is true that from 1.7.2017 that individuals can make tax deductible contributions into super - in the event the workers compensation saving is significant then ensure that the super guarantee payments are made by the employer on the directors’ fees and then top this up with a personal superannuation payment to the $25k limit. The danger here is that a $25k contribution is made in your own name and then the Trust has a liability for 9.5% statutory super which must be paid placing you into an excess contributions situation.

The tax deferral you suggest is quite possible, but it must be genuine… the directors fee must be paid within a reasonable time and PAYG must be deducted and paid.

We refer you to Taxpayer Alert TA 2011/4 which deals with deductibility of unpaid directors’ fees and sham arrangements.

 

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