Private ruling: Deductibility of personal superannuation contributions
Published: September 2013
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Will the personal superannuation contributions be deductible under section 290-150 of the ITAA 1997 in the 2013-14 income year? | A1: No.

Relevant facts and circumstances: Your client is an Australian resident for taxation purposes. Your client is employed as a senior worker at the Employer located in an overseas country on a fly-in fly-out (FIFO) basis. The Employer is not required to provide superannuation contributions on your client's behalf. Your client receives a "Statement of Earning" each income year which discloses payments made and tax paid in the overseas country. Your client intends to claim a deduction for the contributions made into a complying Australian superannuation fund for the 2013-14 income year. A contract of employment between the Employer and your client has been provided.

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: Detailed Reasoning - Summary of decision: A person must satisfy certain conditions before they can claim a deduction in respect of personal contributions made for the purpose of providing superannuation benefits for themselves, or their dependants after their death. One requirement is that where a person is engaged in any activities that result in them being treated as an employee, less than 10% of the total of their assessable income and reportable fringe benefits must be attributable to those activities. In this case your client is engaged in activities that result in them being treated as an employee. Your client's employment income relating to employment is more than 10% of their total assessable income and reportable fringe benefits in the 2013-14 income year. Therefore, your client is not eligible to claim a deduction for any personal superannuation contributions made in the 2013-14 income year. | 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 must also be satisfied for the person to claim the deduction. | 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, it must be made to a complying superannuation fund for the income year of the fund in which the contribution is made. In this case, your client has advised that the personal superannuation contributions will be made to a complying superannuation fund in the 2013-14 income year. Therefore, the complying superannuation fund condition is satisfied. | 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 provisions to avoid doubt as to the status of certain persons. Taxation Ruling TR 2010/1 (TR2010/1) entitled ' Income Tax: superannuation contributions' 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'. In this case, your client is employed by a non-resident company. In accordance with the above, it is considered that your client is engaged in activities that results in them being treated as an 'employee' for the purposes of the SGAA. Effectively, this means that in order to satisfy the condition set out under section 290-160 of the ITAA 1997, your client's total assessable income and reportable fringe benefits attributable to that employment must be less than 10% of his assessable income and reportable fringe benefits for the 2013-14 income year. TR 2010/1 sets out amounts that are attributable to employment activities and states at paragraph 65 and 66: 65. In the application of the maximum earnings test, the relevant 'employment' activity need not be an activity in Australia. For a non-resident, the income attributable to employment outside Australia is not assessable income in Australia and so will not be counted in the maximum earnings test. A non-resident with Australian sourced income that is not attributable to 'employment' activities may therefore be able to deduct a personal superannuation contribution made to an Australian superannuation provider against their Australian sourced income. 66. However, the 'employment' income of an Australian resident employed overseas by a foreign employer will be counted in the maximum earnings test if the income is assessable income. In the facts, your client has stated that the total taxable income is from their foreign employment income. Therefore, the total assessable income and reportable fringe benefits attributable to your client's foreign employment is more than 10% of their total assessable income and reportable fringe benefits for the 2013-14 income year. Consequently, section 290-160 of the ITAA 1997 will not be satisfied. Therefore, your client will not be eligible to claim a deduction for any personal superannuation contributions made in the 2013-14 income year.