Private ruling: Deductibility of personal super contributions
Published: December 2014
Ruling period: Year ended 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 2013

Ruling: Q1: Are compulsory personal pension fund contributions made to a foreign fund by an Australian tax resident while working overseas deductible for taxation purposes? | A1: No

Relevant facts and circumstances: You are an Australian tax resident. You were employed by the Employer, and worked overseas on a fly-in fly-out (FIFO) basis during the 2013-14 and 2014-15 income years. You have provided a letter of offer for employment which provides the terms of your employment with the Employer. Relevant to this case, the terms state that the Employer was required contribute a percentage of your total earnings into an overseas fund of your choice, and you were required to also contribute a percentage of your earnings into this fund. In the 2013-14 income year, the Employer made superannuation contributions to an overseas pension scheme (the Fund). As part of the terms of your employment you also made personal superannuation contributions to the Fund in the 2013-14 income year. In your 2013-14 income tax return, you included your employee superannuation contribution as part of the gross income. Your 2013-14 income tax return shows your assessable income from your employment with the Employer was more than 10% of your combined assessable income and reportable employer superannuation contributions.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 290-150. | Income Tax Assessment Act 1997 subsection 290-150(1). | 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 subsection 290-160(2). | Income Tax Assessment Act 1997 subsection 995-1(1). | Superannuation Industry (Supervision) Act 1993 section 40 | Superannuation Industry (Supervision) Act 1993 subsection 42(1) | Superannuation Industry (Supervision) Act 1993 section 45

Reasons for decision: Summary: You cannot claim a deduction for personal superannuation contributions which were compulsorily made to a foreign fund (the Fund) whilst you working overseas as: (a) the Fund was not a complying superannuation fund; and (b) you do not satisfy the maximum earnings as employee condition. | Detailed Reasoning - Eligibility to claim deductions for personal superannuation contributions: Section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that an individual can, in certain limited circumstances, claim a deduction for their own contribution/s to a superannuation fund. In accordance with subsection 290-150(2) of the ITAA 1997, a taxpayer can only claim a deduction for a personal superannuation contribution where all the following conditions are satisfied: • the complying superannuation fund condition • the maximum earnings as an employee condition • certain age-related conditions • conditions relating to notice to be given to the superannuation fund or RSA provider of intent to deduct the personal contribution. Relevant to this case are the complying superannuation fund and maximum earnings as an employee conditions. | Detailed Reasoning - The complying superannuation fund condition: Section 290-155 of the ITAA 1997 states: If the contribution is made to a *superannuation fund, it must be a *complying superannuation fund for the income year of the fund in which you made the contribution. A 'complying superannuation fund' is defined in subsection 995-1(1) of the ITAA 1997 as having the same meaning within section 45 of the Superannuation Industry (Supervision) Act 1993 (SISA). Subsection 45(1) of the SISA states: A fund is a complying superannuation fund for the purposes of the Income Tax Assessment Act in relation to a year of income (the current year of income ) if, and only if: (b) the Regulator has given a notice to a trustee of the fund under section 40 stating that the fund is a complying superannuation fund in relation to the current year of income; or (c) the Regulator has given a notice to a trustee of the fund under section 40 stating that the fund is a complying superannuation fund in relation to a previous year of income and has not given a notice to a trustee of the fund under that section stating that the fund was not a complying superannuation fund in relation to: (i) the current year of income; or (ii) a year of income that is: (A) later than that previous year of income; and (B) earlier than the current year of income. Further, subsection 42(1) of the SISA states that an entity is a complying superannuation fund in relation to a year of income if: (a) either: (iii) the entity was a resident regulated superannuation fund at all times during the year of income when the entity was in existence; or (iv) the entity was a resident regulated superannuation fund at all times during the year of income when the entity was in existence other than a time, before it became a resident regulated superannuation fund, when the entity was a resident approved deposit fund; and … (emphasis added) Hence, a complying superannuation fund must be resident regulated superannuation fund where the relevant Australian Regulator, as defined in subsection 10(1) of the SISA, has given a notice to the trustee of the fund under section 40 of the SISA that the fund is a complying superannuation fund. From the information provided, the Fund is not a resident Australian superannuation fund as the Fund was established overseas. Thus, as the Fund is not a resident regulated superannuation fund and it would not have received a notice from the Regulator under section 40 of the SISA, it is not a complying superannuation fund. In view of the above, the complying superannuation fund condition under section 290-155 of the ITAA 1997 is not satisfied. | Detailed Reasoning - Maximum earnings as employee condition: Subsection 290-160(1) of the ITAA 1997 states that 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 duties; 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 had not been enacted). Subsection 290-160(2) of the ITAA 1997 provides that to be eligible to deduct the contributions, less than 10% of the total of the following must be attributable to the activities: (a) your assessable income for the income year; (b) your *reportable fringe benefits total for the income year; (c) the total of your *reportable employer superannuation contributions for the income year. In the present case, you were an employee and engaged in work activities on a FIFO basis. Accordingly, section 290-160 of the ITAA 1997 applies to you. Your 2013-14 income tax return shows your assessable income from your employment with the Employer was more than 10% of your combined assessable income and reportable employer superannuation contributions. Accordingly, the maximum earnings as an employee condition under section 290-160 of the ITAA 1997 is not satisfied. | Detailed Reasoning - Conclusion: A taxpayer can only claim a deduction for a personal superannuation contribution under section 290-150 of the ITAA 1997 where all the conditions in subsection 290-150(2) of the ITAA 1997 are satisfied. You do not satisfy the complying superannuation fund and the maximum earnings as employee conditions in sections 290-155 and 290-160 of the ITAA 1997 respectively. As such, you are not eligible to claim a deduction for the compulsory personal superannuation contributions made whilst you were working overseas.