Tax Deducting Superannuation Contributions for Family Trust Employees and Beneficiaries

A recent case has brought to light what many have tried to forget. A family trust cannot claim super contributions for it’s beneficiaries unless they are employees.

A couple had a family trust which earned income and the trust tried to claim a tax deduction for concessional super contributions  made for their directors. This was denied. The ATO argued they were not employees of the trust in the ordinary meaning of the word.

Trusts can only contribute to a beneficiary’s superannuation fund if the person is an employee. This involves them doing work for the trust which can be administration, investment management etc. but it must be real work which would earn a wage.

The benefits paid also cannot be over and above a reasonable amount which would be paid to an outside employee. The days of passing through large super contributions to spouses and adult children are numbered. The ATO has the power to deny excessive deductions to related parties.

Have a look at your trust arrangements, then contact us to discuss your situation.

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