Private ruling: Timing of concessional contributions
Published: May 2012
Ruling period: For the year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Is your client entitled to claim a tax deduction in the 2010-11 income year, for personal superannuation contributions of $25,000, in accordance with section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)? Advice/Answer No.

Relevant facts and circumstances: During the 2010-11 income year, your client withdrew a bank cheque from their bank. An envelope containing the cheque and a 'Notice of Intent to claim or vary a deduction for personal super contributions' form was posted the same day to a superannuation fund (the Fund). It was intended for the contribution to be treated by the Fund as concessional contributions for your client made in the 2010-11 income year. However, the envelope was returned to your client unopened and stamped 'return to sender' after the end of the 2010-11 income year. Your client contacted the Fund to query why the cheque was returned however, although the mail address was correct, no explanation was received from the Fund. Your client subsequently deposited the cheque with an agent of the Fund in the 2011-12 income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 290-C | Income Tax Assessment Act 1997 Subsection 26-55(2) | 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 | Income Tax Assessment Act 1997 Subsection 292-25 | Income Tax (Transitional Provisions) Act 1997 Section 292-20

Reasons for decision: Summary: Your client is not entitled to claim a deduction for personal superannuation contributions for the 2010-11 income year as the contributions were made to the Fund in the 2011-12 year of income. | Detailed Reasoning - Detailed reasoning: A taxpayer can claim a deduction, under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997), for a personal contribution they make to a superannuation fund in a particular income year for the purpose of providing superannuation benefits for themselves, provided the conditions in sections 290-155, 290-160, 290-165 and 290-170 are satisfied. | Detailed Reasoning - Year of receipt of the contribution: In respect of a deduction allowable to a person for their personal superannuation contributions, the relevant year of income is the year in which the contribution is received by the fund. In Taxation Ruling TR 2010/1 the Commissioner of Taxation has provided his view on when a contribution is made. The Commissioner considers that a superannuation contribution is made when the capital of a superannuation fund is increased. Paragraph 4 of TR 2010/1 states: In the superannuation context, a contribution is anything of value that increases the capital of a superannuation fund provided by a person whose purpose is to benefit one or more particular members of the fund or all of the members in general. Further, at paragraph 152 of TR 2010/1, the Commissioner states that: A superannuation fund's capital is most commonly increased by transferring funds to the superannuation provider. At paragraphs 155 to 157 of TR 2010/1 it states: 155. How the transfer occurs is relevant to both whether the fund's capital is increased and when a particular contribution is made. Various cases and texts have noted that cheques and other negotiable instruments are not the same as cash. 156. For example, in Sidney Raper Pty Ltd v. Commonwealth Trading Bank of Australia [1975] 2 NSWLR 227, Moffit P said at 233 a bank cheque or other negotiable instrument although being treated by many as equivalent to, or as good as cash, is still a cheque and not cash. It is effectively converted to cash on presentation to the relevant financial institution if the drawer of the cheque has sufficient funds available in the account with the institution. 157. As noted in ' Mann on the Legal Aspect of Money' in the course of discussing the concept of 'payment': ... the mere acceptance of the cheque or other instrument by the creditor does not of itself constitute 'payment', for it does not have the effect of making funds available to the creditor; such instruments only constitute payment if they are subsequently honoured ... In your client's case, because the envelope containing the bank cheque was unopened, and the bank cheque was not presented to the Fund's bank, the Fund's capital was not increased, nor was the cheque honoured. In fact, it can be said that by not opening the envelope the Fund was not even aware that your client was attempting to make a contribution. | Detailed Reasoning - Deduction for a personal superannuation contribution: An individual is eligible to claim a deduction for a superannuation contribution only if that contribution: · is made in order to obtain super benefits for themself, or for their dependants in the event of their death (subsection 290-150(1) of the ITAA 1997); · is made to a complying superannuation fund (section 290-155 of the ITAA 1997); · satisfies the maximum earnings as an employee condition(section 290-160 of the ITAA 1997); · meets the age-related conditions (section 290-165(2) of the ITAA 1997); · is covered by a notice written to their super fund or RSA provider, in the form approved by the Commissioner and advising the amount that will be claimed as a deduction (section 290-170 of the ITAA 1997); and the super fund or RSA provider has acknowledged their notice of intent and agreed to the amount to be claimed as a deduction (section 290-170(2) of the ITAA 1997). A deduction under section 290-150 of the ITAA 1997 will be allowable only in the income year in which the payment is actually received by the trustee of the fund. In order for a deduction to be claimed in the 2010-11 income year under section 290-150 of the ITAA 1997, the relevant contribution should have been received by the trustee of the superannuation fund on or before 30 June 2011. Whether or not the intention was for the payment to be made by that date is not relevant. What is relevant is whether or not the contribution was made and received by the trustee of the superannuation fund by 30 June 2011. Although your client had intended the contribution to be made to your client's superannuation account for the 2010-11 income year, it was not received by the Fund until the 2011-12 income year. Therefore the personal superannuation contributions were made in the 2011-12 income year, regardless of your client's intention. The legislation does not contain a discretion that can be exercised by the Commissioner to allow a deduction for the relevant year of income where the contributions are actually made in a different year of income. The Commissioner can only exercise, or refuse to exercise, discretion when he is given that discretion in the legislation that he administers. | Detailed Reasoning - Limit on Contributions: The previous age based limits on deductions for personal superannuation contributions was abolished from 1 July 2007, and taxpayers can now claim a full deduction for the amount of the contribution. 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. Contributions for which a person claims a tax deduction are now known as concessional contributions (subsection 292-25 of the ITAA 1997). Concessional contributions made to superannuation funds are subject to an annual cap from 1 July 2007. | Detailed Reasoning - Concessional contributions cap: The concessional contributions cap for the 2011-12 income year is $25,000. A person will be taxed on concessional contributions over the $25,000 cap at a rate of 31.5%. The superannuation fund can be asked to release money to pay this excess contributions tax. The $25,000 contributions cap is subject to indexation. | Detailed Reasoning - Transitional concessional contributions cap: A transitional concessional contributions cap will apply as provided under section 292-20 of the Income Tax (Transitional Provisions) Act 1997 , from 1 July 2007 until 30 June 2012. For the 2011-12 income year, the annual cap is increased to $50,000 for people aged 50 or over. The transitional contributions cap of $50,000 will not be indexed. | Detailed Reasoning - Conclusion: Your client does not satisfy all of the conditions contained in subdivision 290-C of the ITAA 1997 in order to be entitled to claim a deduction for a personal superannuation contribution in the 2010-11 income year. However, provided that all of the conditions contained in subdivision 290-C of the ITAA 1997 are satisfied in the 2011-12 income year your client can claim a deduction provided the deduction does not add to or create a tax loss in that income year.

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