There are two types of Superannuation Contributions:
- Concessional Contribution
The most common way for employees to add to their SMSF balances is to use the 9.5% compulsory Super contribution. Additional to this you can also salary sacrifice Super into your SMSF.
For the self-employed, you can also add to Superannuation as a tax deductable Superannuation contribution, although this is not compulsory. The ATO definition of self-employed is if you earn less than 10% of your taxable income as an employee. In this case there is a form to fill out to notify the Superannuation Fund (retail fund, industry fund or SMSF) of your intention to claim a tax deduction for your Super contribution. The Super Fund will then take this contribution as a concessional contribution (taxed at the concessional rate of 15%) and the Super contribution can be claimed as a tax expense in your personal tax return.
When looking at effective tax planning and promoters on how to effectively use Super, it is usually this personal contributions or Super salary sacrifice that is referred to. For more on this subject, directly from the ATO, click here.
The last option is to add after tax money to your SMSF. The disadvantage is that you would have paid tax at a marginal rate (after tax money) and therefore loose the concessional tax advantage of contributing into Super.
The tax form to complete advising your SMSF that you are making a self employed Super contribution is called a section 290-170 notice. You can download a copy of this form by clicking here.