Private ruling: Deductibility of personal superannuation contributions
Published: March 2015
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to claim a deduction under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) for personal superannuation contributions? | A1: Yes

Relevant facts and circumstances: You are not yet aged 75 as of the 2014-15 income year. You are a self-funded retiree. You are a member of a complying superannuation fund (the Fund). Your sources of income are receipts from rental properties and a defined benefit pension. During the 2014-15 income year, you sold a rental property. You made a capital gain on this property and will include the amount in your taxable income for the 2014-15 income year. You will make a personal contribution to the Fund in the 2014-15 income year from the sale of your rental property. You have not yet provided a valid notice to the Fund of your intent to claim a deduction for your personal contribution. Assumptions You have advised and agree with the following assumptions being made in issuing the Notice of Private Ruling for you: • personal contributions of up to the concessional contributions cap will be made to the Fund by you in the 2014-15 income year; and • the Fund will accept your personal contributions in the 2014-15 income year; and • you will provide a written notice to the trustee of the Fund in accordance with section 290-170 of the ITAA 1997 stating that your intention to claim as a tax deduction in respect of the personal contributions made in the 2014-15 income year and that in providing this notice will satisfy all the requirements of section 290-170; and • the trustee of the Fund will provide a written notice for the 2014-15 income year under section 290-170 of the ITAA 1997 acknowledging receipt of your notice; and • the deduction for the proposed contributions will not add to or create a loss for you for the 2014-15 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 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 Subsection 995-1(1).

Reasons for decision: Summary: You are eligible to claim a deduction for personal superannuation contributions made in the 2014-15 income year provided: (a) all the conditions for claiming the deductions will be satisfied; and (b) the deduction for the contributions for that income year does not add to or create a loss. | Detailed Reasoning - Personal 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 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 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, it must be made to a complying superannuation fund for the income year of the fund in which you made the contribution. In this instance you propose to make personal contributions to a complying superannuation fund (the Fund). Therefore, you will satisfy this condition. | Detailed Reasoning - Maximum earnings as an employee condition - 10% test: 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 SGAA. In this case, you are a self-funded retiree. Consequently, the maximum earnings as an employee test under section 290-160 of the ITAA 1997 will not apply to you in the 2014-15 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 you will be under age 75 during 2014-15 income year when you intend to make the contributions to the Fund, you will satisfy the age-related conditions. | Detailed Reasoning - Notice of intent to deduct conditions: Section 290-170 of the ITAA 1997 provides that you must give to the trustee of the complying superannuation fund (the fund trustee) a valid notice, in the approved form, of your intention to claim a deduction in respect of the contribution, and you 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 you must give the notice to the fund trustee by the earlier of the date of your income tax return being lodged 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 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: • you are a member of the fund or the fund is a successor fund as defined in subsection 995-1(1) of the ITAA 1997; • 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); • the fund trustee has not begun to pay a superannuation income stream based on the contribution; or • before the notice is given: • a contributions splitting application has not been made in relation to the contribution; and; • the fund trustee has not rejected the application. The notice of intent to deduct conditions under section 290-170 of the ITAA 1997 will be satisfied for the 2014-15 income year provided you lodge a valid notice of intent with the Fund trustee before the earlier of: (a) your income tax return for the 2014-15 income year is lodged; or (b) 30 June 2016; and (c) the trustee duly acknowledges your notice. | 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. Provided the amount of the deduction you will claim does not exceed the amount specified in your section 290-170 notice, you will also satisfy this requirement. | Detailed Reasoning - Deduction limits: 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. | Detailed Reasoning - Conclusion: As you will satisfy the required conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997, you will be entitled to claim a deduction of up to the concessional contributions cap for concessional superannuation contributions made in the 2014-15 income year provided the deduction does not add to or create a tax loss in that income year.