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

Ruling: Q1: Can your client claim a tax deduction for personal superannuation contributions made to a superannuation fund in the 2011-12 income year under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.


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 Paragraph 290-160(1)(b). | Income Tax Assessment Act 1997 Subsection 290-160(2). | 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 Subparagraph 292-25(2)(c)(iii). | Income Tax Assessment Act 1997 Subparagraph 292-90(2)(c)(iv). | Income Tax Assessment Act 1997 Subsection 995-1(1). | Income Tax Assessment Regulations 1997 Regulation 995-1.04.

Reasons for decision: Summary: Based on the information provided, your client can claim a deduction for personal superannuation contributions made to a superannuation fund in the 2011-12 income year, as all the conditions for claiming the deduction will be satisfied. | Detailed Reasoning - Personal superannuation contributions made in the 2011-12 income year: 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 Income Tax Assessment Act 1997 (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 (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, that fund must be a complying superannuation fund for the income year in which you made the contribution. In this instance, your client has made a personal contribution to superannuation fund (the Fund) which is a complying superannuation fund. Accordingly, your client satisfies this condition. | Detailed Reasoning - Maximum earnings as an employee condition: 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 Superannuation Guarantee (Administration) Act 1992 (SGAA). For those persons who are engaged in any 'employment' activities in the 2011-12 income year, subsection 290-160(2) of the ITAA 1997 prescribes that a deduction for personal contributions can only be claimed where the sum of their: · assessable income · reportable fringe benefits total and · reportable employer superannuation contributions · attributable to the 'employment' activities is less than 10% of the total of that person's assessable income, reportable fringe benefits total and reportable employer superannuation contributions. | Detailed Reasoning - Section 290-160 of the ITAA 1997 will not prevent a deduction for your client: The employment activity condition outlined in subsection 290-160(1) of the ITAA 1997 has two parts. To satisfy this condition, therefore, a taxpayer must both: · engage in any of the employment activities specified in paragraph 290-160(1)(a) of the ITAA 1997, and · as a result be treated as an employee for the purposes of the SGAA, as specified in paragraph 290-160(1)(b) of the ITAA 1997. In this case the facts show your client was an employee for the purpose of the SGAA in the 2011-12 income year. This means that in order to satisfy the condition set out under section 290-160 of the ITAA 1997, your client's total assessable income, reportable fringe benefits and reportable employer superannuation contributions attributable to duties as an employee must be less than ten percent of your client's total assessable income, reportable fringe benefits and reportable employer superannuation contributions for the 2011-12 income year. The facts provided show that your client's employment income is less than ten percent of your client's total assessable income for the 2011-12 income year. Accordingly, the condition under section 290-160 of the ITAA 1997 has been satisfied. | 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 your client was under age 75 at the time the contribution was made to the Fund during the 2011-12 income year, your client has satisfied the age-related conditions. | Detailed Reasoning - Notice of intent to deduct conditions: Section 290-170 of the ITAA 1997 provides that your client must give to the trustee of the complying superannuation fund (the fund trustee) a valid notice, in the approved form, of your client's intention to claim a deduction in respect of the contribution, and your client 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 your client must give the notice to the fund trustee by the earlier of the date your client lodges an income tax return 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 client's 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: · your client is a member of the fund; · 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. You have advised that your client will provide a valid notice of intention to claim a deduction to the fund trustee in respect of the contribution. You have also advised that your client will receive a written notice from the trustee acknowledging receipt of the notice of intent for the contribution. You assert that your client will meet the requirements of section 290-170 of ITAA 1997 once your client has taken these actions. Provided your client lodges a valid notice of intent with the fund trustee before lodging an income tax return for the 2011-12 income year or by 30 June 2013, whichever is the earlier, and the trustee duly acknowledges your client's notice, the notice of intent to deduct conditions under section 290-170 of the ITAA 1997 will be satisfied. | 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. You have advised of the amount your client intends to claim as a deduction in respect of the contribution. Provided this amount does not exceed the deductible amount specified in your client's section 290-170 notice, your client will also satisfy this requirement. | Detailed Reasoning - Deduction limits: As noted in your application, 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. You have advised that the deduction for the proposed contribution will not add to or create a loss in the 2011-12 income year. Therefore it is accepted that the deduction for the contribution will not create or increase a loss in this income year. | Detailed Reasoning - Conclusion: As your client will satisfy all the required conditions in subdivision 290-C of the ITAA 1997, your client can claim a deduction in the 2011-12 income year for the amount of the personal contribution made to the Fund in that income year which your client specifies on the section 290-170 notice. | Detailed Reasoning - Further issues for you to consider: It is noted that the Fund is a constitutionally protected fund (CPF). Therefore, subparagraph 292-25(2)(c)(iii) of the ITAA 1997 operates to exclude the contribution from being a concessional contribution in the 2011-12 income year. As a result, the contribution will not be counted towards your client's annual concessional contributions cap for that financial year. To the extent that the contribution forms part of the contributions segment of your client's superannuation interest in the CPF (which includes personal undeducted contributions), it will be a non-concessional contribution, and it will be counted towards his non-concessional contributions cap for the financial year in which the contribution is made to the 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: Your client, who is over age 55 but under age 65, is a member of a constitutionally protected fund (CPF) which is also a complying superannuation fund. | During the 2011-12 income your client was an employee who worked on a part time/casual basis. | You have provided details relating to your client's total assessable income for the 2011-12 income year. | The details show that your client's assessable income attributable to employment activities is less than ten percent of your client's total assessable income. | You state that no reportable fringe benefits were received by your client nor are any reportable employer superannuation contributions expected for your client. | In the 2011-12 income year your client made a personal superannuation contribution to the Fund to provide your client with superannuation benefits or for your client's dependants in the event of your client's death. | You state that before lodging a 2011-12 income tax return your client intends to provide a written notice to the Trustee for the Fund of an intention to claim a deduction for the personal contribution. Your client also intends to receive a notice for the 2011-12 income year from the Trustee, acknowledging receipt of your client's notice of intent in respect of this contribution. | You state the deduction for the personal contribution will not add to or create a loss for your client in the 2011-12 income year.