Private ruling: Deduction for personal superannuation contributions
Published: February 2014
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Can your client claim a tax deduction for personal superannuation contributions to be made to a superannuation fund under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

Relevant facts and circumstances: Your client, who is under age 55 is self employed. You have advised that for the 2013-14 income year, your client will not generate income as an employee (including reportable fringe benefits and reportable employer superannuation contributions) that exceeds 10% of your client's assessable income for the income year. In this respect, you have also advised that your client will satisfy the maximum earnings as an employee condition in this income year. Your client is a member of a complying superannuation fund (the Fund). Your client intends to make a personal contribution to the Fund in the 2013-14 income year. Your client intends to provide a written notice to the fund trustee, stating their intent to claim a deduction for this contribution. Your client also intends to receive a notice for the 2013-14 income year from the Fund trustee, acknowledging receipt of your client's notice of intent in respect of this contribution. You have advised that a deduction for the proposed contribution will not add to or create a loss for your client in the 2013-14 income year. You have also advised the amount of the deduction your client will claim for the contribution in the 2013-14 income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 26-55(2). | Income Tax Assessment Act 1997 Section 290-150. | Income Tax Assessment Act 1997 Subsection 290-150(2). | Income Tax Assessment Act 1997 Section 290-155. | Income Tax Assessment Act 1997 Section 290-160. | Income Tax Assessment Act 1997 Subsection 290-160(1). | Income Tax Assessment Act 1997 Paragraph 290-160(1)(a). | Income Tax Assessment Act 1997 Paragraph 290-160(1)(b). | Income Tax Assessment Act 1997 Subsection 290-160(2). | Income Tax Assessment Act 1997 Section 290-165. | Income Tax Assessment Act 1997 Subsection 290-165(2). | Income Tax Assessment Act 1997 Section 290-170. | Income Tax Assessment Act 1997 Section 290-175. | Income Tax Assessment Act 1997 Subparagraph 292-25(2)(c)(iii). | Income Tax Assessment Act 1997 Subparagraph 292-90(2)(c)(iv). | Income Tax Assessment Act 1997 Subsection 995-1(1). | Income Tax Assessment Regulations 1997 Regulation 995-1.04.

Reasons for decision: Summary: Based on the information provided, your client can claim a deduction for personal superannuation contributions to be made in the 2013-14 income year, as all the conditions for claiming the deduction will be satisfied. | Detailed Reasoning - Personal superannuation contributions made in the 2013-14 income year: A person can claim a deduction for personal contributions made to a superannuation fund for the purpose of providing superannuation benefits for themselves under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997). However, subsection 290-150(2) of the ITAA 1997 provides that the conditions in sections 290-155, 290-160 (if applicable), 290-165 and 290-170 must all be satisfied before the person can claim a deduction for the contributions made in that income year. These conditions are explained in detail in Taxation Ruling TR 2010/1 (TR 2010/1) entitled 'Income Tax: superannuation contributions' . | Detailed Reasoning - Complying superannuation fund condition: The condition in section 290-155 of the ITAA 1997 requires that where the contribution is made to a superannuation fund, that fund must be a complying superannuation fund for the income year in which you made the contribution. In this instance, your client proposes to make a personal contribution to a complying superannuation fund (the Fund). Therefore, your client will satisfy this condition. | Detailed Reasoning - Maximum earnings as an employee condition: Subsection 290-160(1) of the ITAA 1997 operates to apply the maximum earnings as an employee condition only if, in the income year in which the contribution is made, the person is engaged in any of the following activities (paragraph 290-160(1)(a)): · holding an office or appointment (for example, a director of a company); · performing functions or duties; · engaging in work; · doing acts or things; and the activities result in that person being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA). For those persons who are engaged in any 'employment' activities in the 2012-13 income year, subsection 290-160(2) of the ITAA 1997 prescribes that a deduction for personal contributions can only be claimed where the sum of their: · assessable income · reportable fringe benefits total and · reportable employer superannuation contributions attributable to the 'employment' activities is less than 10% of the total of that person's assessable income, reportable fringe benefits total and reportable employer superannuation contributions. | Detailed Reasoning - Section 290-160 of the ITAA 1997 will not prevent a deduction for your client: The employment activity condition outlined in subsection 290-160(1) of the ITAA 1997 has two parts. To satisfy this condition, therefore, a taxpayer must both: · engage in any of the employment activities specified in paragraph 290-160(1)(a) of the ITAA 1997, and · as a result be treated as an employee for the purposes of the SGAA, as specified in paragraph 290-160(1)(b) of the ITAA 1997. Where your client is engaged in an employment activity during the 2012-13 income year, the maximum earnings as employee condition will apply to your client. In that circumstance, your client will need to satisfy the maximum earnings condition prescribed in subsection 290-160(2) of the ITAA 1997 in order to claim a deduction for the proposed contribution. Your client is self employed. You have advised that it is not expected that your client will be engaged in an employment activity during the 2013-14 income year. In this respect, you have also advised that, during this income year, your client will not generate income as an employee (including reportable fringe benefits and reportable employer superannuation contributions) that exceeds 10% of your client's assessable income for this income year. Based on the information you have provided in your application, it is accepted that section 290-160 of the ITAA 1997 will not operate to prevent your client from claiming a deduction for the proposed contribution your client will make to the Fund in this income year. | Detailed Reasoning - Age-related conditions: Under subsection 290-165(2) of the ITAA 1997 the ability to claim a deduction ceases for contributions that are made after 28 days from the end of the month in which the person making the contribution turns 75 years of age. As your client will be under age 75 at all times during the 2013-14 income year, your client will satisfy the age-related conditions. | Detailed Reasoning - Notice of intent to deduct conditions: Section 290-170 of the ITAA 1997 provides that your client must give to the trustee of the complying superannuation fund (the Fund trustee) a valid notice, in the approved form, of an intention to claim a deduction in respect of the contribution, and your client must also have been given an acknowledgment of receipt of the notice by the Fund trustee. Section 290-170 of the ITAA 1997 also provides that your client must give the notice to the Fund trustee by the earlier of the date your client lodges an income tax return or the end of the income year following the year in which the contribution was made. In addition, the Fund trustee is required to acknowledge your client's notice without delay. A notice will be valid as long as the following conditions are satisfied: · the notice is in respect of the contribution; · the notice is not for an amount covered by a previous notice; · at the time when the notice is given: Ÿ your client is a member of the Fund; Ÿ the Fund trustee holds the contribution (for example, a notice will not be valid if a partial roll-over of the superannuation benefit which includes the contribution covered in the notice has been made); Ÿ the Fund trustee has not begun to pay a superannuation income stream based on the contribution; or · before the notice is given: Ÿ a contributions splitting application has not been made in relation to the contribution; and; Ÿ the Fund trustee has not rejected the application. You have advised that your client will provide a valid notice of an intention to claim a deduction to the Fund trustee in respect of the proposed contribution. You have also advised that your client will receive a written notice from the trustee acknowledging receipt of this notice of intent for the contribution. You assert that your client will meet the requirements of section 290-170 of ITAA 1997 once these actions have been taken. Provided your client lodges a valid notice of intent with the Fund trustee before an income tax return for the 2013-14 income year is lodged or by 30 June 2015, whichever is the earlier, and the trustee duly acknowledges this notice, the notice of intent to deduct conditions under section 290-170 of the ITAA 1997 will be satisfied. | Detailed Reasoning - Deduction limited by amount specified in notice: Section 290-175 of the ITAA 1997 states that the deduction cannot be more than the amount covered by the notice given under section 290-170 of the ITAA 1997. You have advised the amount of the deduction your client intends to claim in respect of the contribution. Provided this amount does not exceed the deductible amount specified in your client's section 290-170 notice, your client will also satisfy this requirement. | Detailed Reasoning - Deduction limits: As noted in your application, the allowable deduction is limited under subsection 26-55(2) of the ITAA 1997 to the amount of assessable income remaining after subtracting all other deductions (excluding previous years tax losses and any deductions for farm management losses) from a taxpayer's assessable income. Therefore a deduction for personal superannuation contributions cannot add to or create a loss. You have advised that the deduction for the proposed contribution will not add to or create a loss in the 2013-14 income year. Therefore it is accepted that the deduction for the contribution will not create or increase a loss in this income year. | Detailed Reasoning - Conclusion: As your client will satisfy all the required conditions in subdivision 290-C of the ITAA 1997, your client can claim a deduction in the 2013-14 income year for the entire personal contribution they intend to make to the Fund in the 2013-14 income year.