10% rule for superannuation contributions abolished - Grow SMSF

The 10% rule for superannuation contributions has been removed from 1 July 2017. Prior to this date, individuals had to meet strict rules to make personal deductible super contributions, but it’s a little bit easier to do so since changes came into effect from the 2017/18  financial year.


According to the Australian Taxation Office (ATO), up until 30 June 2017, individuals had to meet the ‘10% rule‘ or ‘10% test’ to be eligible for a tax deduction for personal super contributions. This rule meant it could be quite hard for employees to get extra pre-tax (concessional) contributions into their super fund unless their employer was prepared to enter a salary sacrifice arrangement. It could also be challenging for anyone combining self-employment with work as an employee.

What was the 10% rule for superannuation contributions?

The 10% rule was, as the ATO details, a legal requirement which stipulated that any individual could not claim a tax deduction for personal superannuation contributions if they received 10% or more of the following as an employee:

  • assessable income plus
  • reportable fringe benefits plus
  • total reportable employer superannuation contributions.

The ATO points out that this rule applied even if the employer didn’t make superannuation contributions on behalf of the employee.

The 10% rule caught many ostensibly self-employed people, especially during the start-up phase or periods of low business activity where they may have picked up extra employed work to supplement their business income. You can read some examples provided by the ATO of how the 10% rule was applied here.

Why was the 10% rule scrapped?

As explained by the ATO, the 10% rule was removed effective from 1 July 2017 for several reasons. Superannuation lobby groups argued it was unfair to those with out-of-the-ordinary employment arrangements, and created unnecessary red tape in the superannuation system. Both the SMSF Association  and the Institute of Chartered Accountants of Australia had fought for a change to the rule as early as 2014, arguing that it no longer made sense in the wake of changes to superannuation made in the 2000s.

The rule was abolished in the May 2017 Federal Budget. Now the ATO notes no such restrictions on individuals looking to make tax-deductible contributions. Regardless of whether they’re employed, self-employed, or a combination of both, most people should be able to claim tax deductions for personal super contributions provided they follow the steps outlined by the ATO.

Any questions please contact Grow SMSF.


Copyright © 2020 by Grow SMSF Pty Ltd. All rights reserved.
Registered Agent Number 26057627.

General Information Warning & Disclaimer

All information contained on this website is provided as an information service only and, therefore, does not constitute, and should not be relied upon as, financial product advice. None of the information provided takes into account your personal objectives, financial situation or needs, and you will need to make your own decision about how to proceed. Alternatively, for financial product advice that takes account of your particular objectives, financial situation or needs, you should consider seeking financial advice from an Australian Financial Services licensee before making a financial decision.

Grow SMSF does not hold an Australian Financial Services Licence (AFSL) and we are not authorised representatives of a AFSL. We do not provide financial product advice or recommend any financial products either expressly or implied.

From time to time Grow SMSF may produce information or content about specific financial products or services that enable access to specific financial products however we do not recommend, endorse or confirm as suitable any financial product or service featured on the Grow SMSF website or social media assets. This condition specifically applies to any financial product where Grow SMSF provides services at a discounted or preferential fee due to the use of those products, services or accounts. It’s not compulsory to utilise a specific account or service provider to be a client of Grow SMSF however the types of accounts, investments and service providers you use for your SMSF will determine the fees your SMSF is charged.

Where Grow SMSF provides information in relation to a financial product or service supported by or integrated with Grow SMSF the information is factual information only about the operation of the account or service and how data or reporting information is made available to us. Before making a decision on any financial product for your SMSF you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the PDS before making any decision. As financial product and solution providers are frequently making changes to their products and services Grow SMSF cannot accept any responsibility for any outdated or inaccurate information provided on this website or via social media assets.

Grow SMSF Gold Coast based accountants looking after SMSF trustees from around Australia. Liability limited by a Scheme approved under Professional Standards Legislation.