Private ruling: Deductibility of personal superannuation contributions
Published: June 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Can you claim a deduction under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) for your personal contributions to your superannuation fund? | A1: No.


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 290-170 | Superannuation Guarantee (Administration) Act 1992 Section 12

Reasons for decision: Summary: You are unable to claim a deduction under section 290-150 of the ITAA 1997 for the personal superannuation contributions you made to your fund. You have failed to meet the requirements of section 290-160, as you have received payments in excess of 10% of your total assessable income for the year where the payments were in relation to an activity where you were treated as an employee for Superannuation Guarantee purposes. | Detailed Reasoning - Detailed reasoning: The rules regarding the deductibility of personal superannuation contributions are set out in Subdivision 290 - C of the ITAA 1997. There are a number of requirements to be met to be able to claim a deduction. The key requirement in this case is contained in section 290-160 of the ITAA 1997 - Maximum earnings as an employee condition. This section is considered where: · in the income year in which the taxpayer makes a contribution, the taxpayer engages in any of the following activities: holding an office or appointment; performing functions or duties; engaging in work; doing acts or thing, and · the activities result in the taxpayer being treated as an employee for the purposes of the Superannuation Guarantee (Administration ) Act 1992 (SGAA 1992): subsection 290-160(1). 'Employee' has an expanded meaning under section 12 of the SGAA 1992. To be able to claim a deduction for personal superannuation contributions, less than 10% of the total of your assessable income, reportable fringe benefits and your reportable employer superannuation contributions for the year must be attributable to the above activities. You have received an amount of payments and had superannuation paid on this amount from an employment agency. We have to determine whether this amount correctly comes under the classification of amounts described in section 290-160, whether for this amount, you are considered an 'employee' under the expanded definition in section 12 of the SGAA 1992. Superannuation Guarantee Ruling SGR 2005/2 - Superannuation guarantee: work arranged by intermediaries - explains the Commissioner's view of how the definitions of 'employer' and 'employee' in the SGAA 1992 apply to contractual and working arrangements involving three (or more) parties. The ruling sets out the principles that apply in determining whether there is an employment relationship for the purposes of subsections 12(1) and (3) of the SGAA 1992: It is first necessary to determine whether a contract for the performance of work exists and with whom it exists. In tripartite working arrangements, it is the ultimate legal control over the worker that is most relevant; not the day to day direction and control. A contract between the intermediary and worker can still be a common law contract of employment even though the work is done for the immediate benefit of the end user. The classification of a person as an employee for the purposes of the SGAA 1992 is not solely dependent upon the existence of a common law employment relationship. The definition extends to certain persons who would not be common law employees. If a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract. Subsection 12(3) was designed to include a person who may not be an employee in the normal sense but who is in fact not very distinguishable from an employee. A worker engaged by an intermediary may be directed to work for the benefit of the end-user client without altering the nature of the relationship between the intermediary and worker. Where workers are employed through intermediaries, the employer (if any) for SGAA 1992 purposes must be established as it is the employer who is required to satisfy the requirements of the SGAA 1992 in respect of these workers. | Detailed Reasoning - Application to your case: You have entered into a contract with an employment agency where you will provide services on their behalf to an end user who is a client of theirs. You are, in a relevant sense, working for the employment agency while working for their client. There is no indication that there is any contract between yourself and the end user. Your timesheet is signed by a supervisor (assumed end-user) but it is submitted to the employment agency for the payment of your agreed hourly fee. If you have any issues with payments you contact the employment agency. It is considered that they have the ultimate legal control over you as a worker. You are undertaking a contract that is wholly and principally for your labour. The payments are for the provision of your personal services. There is no provision of major equipment or other assets. You are paid for 8 hours per day, five days per week, at an hourly rate. The evidence indicates that you would be considered to be an employee of the employment agency under the extended definition of employee in subsection 12(3) of the SGAA 1992. They would have an obligation to pay employer superannuation as they have engaged you to perform duties, where you would be considered to be an employee for SGAA purposes. | Detailed Reasoning - 10% Rule: From the information you have provided, the income from the activity where you are considered to be an employee for SGAA purposes is 32% of the total amount. Therefore you would fail to meet the requirement (less than 10%) in section 290-160 of the ITAA 1997 and would not be able to claim a tax deduction for the personal contributions you have made to your superannuation fund.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You worked for part of the year as a sole trader under a contract with an employment agency. For the remainder of the year you worked directly, as a sole trader for other clients. | The information you have provided contains the following information regarding your contract with the employment agency: | Your consultant should have clearly explained the contents of the starter kit to you and how all the necessary documentation is to be present so that you will get paid properly each week and without delay. | At the beginning of your contract you are required to complete the contract agreement SIGNED), TFN Declaration Form(enclosed) and Contractor Banking Details Form that have been provided to you and return all to our head office, before we can make your first payment. If the TFN Declaration form is not returned within 28 days you will be taxed @ 48.5%. | As a Sole Trader we deduct PAYG tax only. GST will not be applicable. | At the completion of each week you are required to send us one copy of your time sheet (signed by your supervisor), and leave a copy with the Company you are working for. Also you need to send us an invoice each week filled out as per the enclosed sample. | Your Superannuation Standard Choice Form must be returned fully completed otherwise your superannuation payments will be made to our default Fund. | For any payroll - superannuation - taxation & payment summary (group certificate) queries, please contact the employment agency. | You have stated that you were wholly responsible for the outcome of your work, charged on an hourly basis for your consultancy fee and invoiced the employment agency. | The employment agency deducted the income tax from your fee and also paid superannuation. At the end of the 2011 financial year they issued you a payment summary showing gross income and total tax withheld | You earned about twice as much income from these other sources. | During the 2011 financial year you made a personal contribution to your superannuation fund and notified your fund that you would be claiming a deduction.