Private ruling: Personal superannuation contribution
Published: August 2014
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Will the proposed income stream from your superannuation fund be counted for the purposes of determining the maximum earnings as an employee condition under section 290-160 of the Income Tax Assessment Act 1997 ? Advice/Answers No.

Relevant facts and circumstances: You derive income from rental properties. You have attained preservation age. You intend to start an income stream account with your superannuation fund. You intend to make a personal superannuation contribution to your fund.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 290-150. | Income Tax Assessment Act 1997 Section 290-155. | Income Tax Assessment Act 1997 Section 290-160. | Income Tax Assessment Act 1997 Section 290-165. | Income Tax Assessment Act 1997 Section 290-170. | Superannuation Guarantee (Administration) Act 1992 Section 12.

Reasons for decision: Summary: The maximum earnings as an employee condition only applies where you are engaged in any activities that result in you being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA). The income stream from your superannuation fund will not be counted for the purposes of determining the maximum earnings as an employee condition as it is not income attributable to employment activities. | Detailed Reasoning - Personal deductible superannuation contributions:: 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, the conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997 must also be satisfied for the person to claim the deduction. In the case you have sought advice on the maximum earnings as an employee condition. | Detailed Reasoning - Maximum earnings as an employee condition:: The condition in section 290-160 of the ITAA 1997 requires that if a taxpayer is engaged in any activities that result in them being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA) then less than 10% of the total of their assessable income and reportable fringe benefits must be attributable to those activities. Subsection 290-160(1) states: This section applies if: (a) in the income year in which you make the contribution, you engage in any of these activities: (i) holding an office or appointment; (ii) performing functions or appointment; (iii) engaging in work; (iv) doing acts or things; and (b) the activities result in you being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (assuming that subsection 12(11) of that act has not been enacted). Subsection 12(1) of the SGAA states that the terms employer and employee have their ordinary meaning. Subsections 12(2) to (11) of the SGAA expand the meaning of those terms and make provision to avoid doubt as to the status of certain persons. Taxation Ruling TR 2010/1 entitled ' Income Tax: superannuation contributions' (TR 2010/1) explains the Commissioner's view on the rules that apply if a personal contribution is to be deducted. In regards to whether a person is an employee for the purposes of the SGAA TR 2010/1 states at paragraph 59: A person will be engaged in an 'employment' activity if they are engaged in an activity in the income year that results in them being treated as an employee for the purposes of the SGAA. The term 'engaged' is not defined and takes its ordinary meaning. One of several meanings given to engaged is 'busy or occupied; involved'. Another meaning is 'under an engagement' where the ordinary meaning of 'engagement' is given as 'under an obligation or agreement'. Please note, the maximum earnings as an employee condition under section 290-160 of the ITAA 1997 only applies where you are engaged in any activities that result in them being treated as an employee for the purposes of the SGAA. In this case, you intend to start an income stream account with your superannuation fund. Notwithstanding that section 290-160 of the ITAA 1997 may not apply to you the income stream from your superannuation fund will not be counted for the purposes of determining the maximum earnings as an employee condition as it is not income attributable to employment activities. | Detailed Reasoning - Valid notice of intent to deduct condition:: Section 290-170 of the ITAA 1997 provides that in order for a contribution, or part of the contribution, to be deductible you must have given a valid notice to the superannuation fund in the approved form. The notice must state your intention to claim a deduction and must be lodged prior to whichever is earliest: • The day on which you lodge your income tax return for the financial year in which the contributions was made. • Before the end of the next financial year after the contribution was made. Additionally, the superannuation fund must have acknowledged receipt of your notice to claim a deduction for your personal contributions. | Detailed Reasoning - Accepting contributions: Whether a regulated superannuation fund is able to accept contributions is determined under the Superannuation Industry (Supervision) Act 1993 (SISA) and the Superannuation Industry (Supervision) Regulations 1994 (SISR). Regulation 7.04 of the SISR states that a regulated superannuation fund can accept all contributions for a member under 65 years of age. As the superannuation fund is a taxed super fund, they pay tax on the super contributions they receive and earnings such as interest from investments. If you're under age 60 when you receive a super income stream, the taxed element of your pension is considered to be assessable income and will be taxed at your marginal rate, plus Medicare levy. However, you may be eligible for a 15% tax offset.