Can a child claim a tax deduction for a personal super contribution?

17 Feb 2022
Annie Dawson

Annie Dawson

Senior SMSF Technical Specialist

Personal deductible super contributions by someone less than 18 are not a common occurrence.  But there may be circumstances where it’s worth looking at.  But is every child eligible?

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No. Not all children are eligible to claim a tax deduction for a personal super contribution. It will depend on a few things, including their income. Take for example, sisters Alicia (age 14) and Michelle (age 16). They have both received a trust distribution from an investment trust controlled by their grandparents. Michelle also has a casual job in a retail store. Michelle may be eligible to claim a tax deduction for a personal super contribution, but Alicia will not. But why the different outcome? Let’s take a closer look at the rules.

Under 18 at year end

In addition to the ‘usual conditions’ necessary to qualify for a tax deduction for a personal super contribution, a child who hasn’t turned 18 before the end of the financial year in which the contribution is made, also needs to have earned income:

  • from carrying on a business, or
  • from activities that result in them being an employee for Super Guarantee purposes. 

This will include a child who is regarded as an employee in the ordinary sense of the meaning as well as a child in a genuine arrangement who is paid for:

  • work under a contract predominantly for their labour, or
  • an activity involving their skills as an artist, musician, sports person, or
  • work of a domestic and private nature (even if it’s for less than 30 hours a week).

It will be important a child is able to evidence the hours worked and remuneration received with appropriate documentation such as a work diary, invoices, time sheets, pay slips etc.  

So looking at our example, Michelle may be entitled to claim a tax deduction for a personal super contribution as her income includes wages from her casual job, where she is regarded as an employee for SG purposes. It does not matter if Michelle’s employer has actually made SG contributions on her behalf. Her younger sister Alicia on the other hand, only has passive income, and will not be eligible to claim a tax deduction for any personal super contributions made.

Contribution caps

But what about contribution caps you ask? There are no age restrictions on contribution caps. For example, in the current financial year, a child will have a concessional contributions cap of $27,500. Similarly, a child may be eligible to increase their concessional contributions cap by carrying forward unused concessional contribution cap space. 

For example, if Michelle had a total super balance of less than $500,000 at 30 June 2021 and had the following concessional contributions in prior years, for the current financial year, Michelle’s concessional contributions cap could be increased to $102,400 as follows:

  2018/19 2019/20 2020/21 2021/22 Total

Concessional contribution made

$nil

$nil

$100

$nil

$100

Unused cap

$25,000

$25,000

$24,900

$27,500

$102,400

Things to remember

To ensure the super contribution can be claimed as a tax deduction, it must be regarded as a personal contribution (and not a third party contribution). This means the source of the funds must come from a child’s after tax monies. For example, a child might be gifted monies from a parent or grandparent or receive monies as part of a beneficiary entitlement.

Also, whilst making deductible personal super contributions is a tax effective way to save for retirement, don’t forget, super contributions will generally be preserved until the member meets a condition of release. So for a child who is 15 years old, that’s at least another 45 years away, assuming their preservation age remains at the age of 60 and they are eligible to retire at that time. 

One exception to this however is the First Home Super Save Scheme. Once a child reaches age 18, they may be eligible to have up to $30,000 of voluntary super contributions released if certain conditions are met. This amount is increasing to $50,000 from 1 July 2022.