Private ruling: Deduction for personal superannuation contribution
Date of advice: 24 March 2017
Published: August 2017
Ruling period: Income year ending 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can a person (the Taxpayer) claim a deduction for a proposed personal superannuation contribution made to a constitutionally protected fund (CPF)? | A1: Yes.

Relevant facts and circumstances: The Taxpayer operates a private practice. The Taxpayer is a member of a Fund (the Fund), a complying superannuation fund. The Fund is a CPF. The Taxpayer will not be engaged in employment activities in the 20XX-YY income year. The Taxpayer intends to contribute an amount (the Contribution) to the Fund in the 20XX-YY income year. The Taxpayer intends to provide the trustee of the Fund with valid notices of intent to claim a deduction for the proposed personal contributions to be made in the 20YY-ZZ income year. In response, the Taxpayer expects to receive an acknowledgement from the Fund for this notice. The Taxpayer is aged less than 75 years.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 26-55. | 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 section 290-175. | Income Tax Assessment Act 1997 section 291-25(2)(c)(iii). | Income Tax Assessment Act 1997 section 292-90(2)(c)(iv). | Income Tax Assessment Act 1997 section 293-30. | Income Tax Assessment Act 1997 section 307-220(2).

Reasons for decision: Summary: The Taxpayer can claim a deduction for personal superannuation contributions made in the 20XX-YY income year as all the conditions of section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) have been satisfied. | Detailed Reasoning - Detailed reasoning: A person may claim a deduction for contributions made to their superannuation fund for the purpose of providing a benefit to themselves, or their dependants after death, under section 290-150 of the ITAA 1997. However, subsection 290-150(2) of the ITAA 1997 states that all the conditions in sections 290-155, 290-160 (if applicable), 290-165 and 290-170 must also be satisfied for an individual to deduct a contribution made in that income year. | Detailed Reasoning - Complying superannuation fund condition: Section 290-155 of the ITAA 1997 requires that where a contribution is made to a superannuation fund, the fund must be a complying superannuation fund for the income year in which the contribution is made. You are a member of the Fund and intend to make your contributions to this superannuation fund. The Fund is an exempt public sector superannuation scheme, and is a complying superannuation fund subject to state government supervision. Thus, the Fund is a complying superannuation fund. | Detailed Reasoning - Maximum earnings as an employee condition: Subsection 290-160(1) of the ITAA 1997 provides that the maximum earnings test will apply if, in the income year in which the contributions are made, a person engaged in any of the following activities: ● holding an office or appointment (as a director of a company, for example); ● performing functions and 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 Superannuation Guarantee (Administration) Act 1992 (SGAA). Where a person is engaged in employment activities in the income year in which they make a contribution less than 10% of the following income must be attributable to those activities: ● Their assessable income for the income year; ● Their reportable fringe benefits (RFB) for the income year; and ● The total of their reportable employer superannuation contributions for the income year. Taxation Ruling TR 2010/1 Income Tax: Superannuation Contributions (TR 2010/1) outlines the Commissioner's view on the requirements to be satisfied for a deduction of superannuation contributions. In discussing the maximum earnings test, the Commissioner states at paragraph 58 that: Those persons who have not engaged in an 'employment' activity in the income year in which they make a contribution, such as persons who although receiving workers' compensation payments are not employed at any time during the year, are not subject to the maximum earnings test. The facts indicate that the Taxpayer will not be engaged in any employment activities in the 20XX-17 income year. Consequently, section 290-160 of the ITAA 1997 will not apply in determining the deductibility of your superannuation contributions. | 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 contributions turns 75 years of age. The Taxpayer is less than 75 years of age. | Detailed Reasoning - Notice of intent to deduct: In order to be able to claim a deduction, section 290-170 requires that a valid notice, in the approved form, must be provided to your fund trustee. Subsection 290-170(1) of the ITAA 1997 requires that a valid notice, in the approved form, must be provided to your fund trustee by the earlier of: ● The day on which you lodge your income tax return for the income year in which you make a contribution; or ● The end of the income year following the year in which the contribution is made (being, in this instance, the 20YY-18 income year). Subsection 290-170(1)(c) of the ITAA 1997 requires that the trustee must provide an acknowledgement of their receipt of the contribution made by you. Subsection 290-170(2) of the ITAA 1997 also requires that the following conditions be satisfied for a notice of intent to deduct to be valid: ● The notice be in respect of the contribution; ● The notice is not for an amount covered by a previous notice; ● At the time the notice is given, you are: ● A member of the fund; or ● The fund trustee holds the contribution; ● 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 contribution. The Taxpayer has advised that they intend to provide a valid notice of intent to claim a deduction to the Fund for the Contribution the Taxpayer intends to make in the 20XX-17 income year. Provided that the notice is lodged either before the income tax return for the 20XX-17 income year is lodged or by the end of the income year following that in which the contributions were made, and the trustee duly acknowledges receipt of your notice, the conditions in section 290-170 of the ITAA 1997 will be satisfied. | Detailed Reasoning - Deduction limits: Section 290-175 of the ITAA 1997 provides that the deduction cannot be more than the amount specified in the notice of intent to deduct a contribution. Provided the amount of the deduction that the Taxpayer intends to claim does not exceed the amount specified in the notice of intent to claim a deduction, you will satisfy this requirement. The allowable deduction is also limited under subsection 26-55(2) of the ITAA 1997 to the amount of assessable income remaining after subtracting all other deductions (excluding previous year's tax losses and any deductions for farm management losses) from a taxpayer's assessable income. Thus a deduction for personal superannuation contributions cannot add to, or create, a loss.