Private ruling: Deductibility of personal superannuation contributions
Date of advice: 29 September 2016
Published: November 2016
Ruling period: 2016-17 income year.
Date scheme commenced: July 2016

Ruling: Q1: Can you claim a deduction for personal superannuation contributions that you make to a complying superannuation fund during the 2016-17 income year under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes, provided the conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997 are also satisfied and the deduction does not create or increase a tax loss.

Relevant facts and circumstances: You are an Australian citizen, and have been working overseas for many years. You work full time overseas. Your overseas salary is not taxed in Australia. You are a non-resident of Australia for taxation purposes. Your Australian income from investments is an amount which is taxed. You commenced to make non-concessional contributions to an Australian superannuation fund from last year. You are under 75 years of age.

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

Reasons for decision: Summary: You can claim a deduction for personal superannuation contributions that you make to a complying superannuation fund during the 2016-17 income year under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) provided the conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997 are also satisfied and the deduction does not create or increase a tax loss. | Detailed Reasoning - Concessional contributions: Under subsection 291-25 of the ITAA 1997, concessional contributions are contributions made to a complying superannuation fund by or for an individual that are included in the assessable income of a superannuation provider. Concessional contributions include: • compulsory employer contributions; • salary sacrifice contributions; or • contributions allowed as an income tax deduction, such as superannuation contributions made by the self-employed. From the facts you are a non-resident of Australia for taxation purposes, you work overseas and your salary is not taxed in Australia. Your concessional contributions may include personal superannuation contributions allowed as an income tax deduction if you are entitled to claim a deduction for those contributions. | Detailed Reasoning - Deduction for personal superannuation contributions: A person can claim a deduction for personal contributions made to a superannuation fund for the purposes of providing for superannuation benefits for themselves under section 290-150 of the ITAA 1997. However, under subsection 290-150(2) of the ITAA 1997 a person must also satisfy all the conditions in sections 290-155, 290-160, 290-165 and 290-170 before they can claim a deduction in respect of personal contributions made in the relevant income year. It should be noted that under section 26-55 of the ITAA 1997, that the deduction for personal superannuation contributions cannot create or increase a tax loss. We will discuss each of the conditions under subsection 290-150(2) of the ITAA 1997 that must be met. | Detailed Reasoning - Maximum earnings as employee condition: Subsection 290-160(1) of the ITAA 1997 states: This section applies if: (a) in the income year in which you make the contribution, you engage in any of these activities: (i) holding an office or appointment; (ii) performing functions or duties; (iii) engaging in work; (iv) doing acts or things; and (b) the activities result in you being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (assuming that subsection 12(11) of that Act had not been enacted). For those persons who fall under the requirements outlined above, 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. This calculation is referred to as the maximum earnings test. The operation of the maximum earnings test is discussed in Taxation Ruling TR 2010/1 Income tax: superannuation contributions. Paragraph 62 and 65 of TR 2010/1 states: 62. Where the person engages in any 'employment' activities in the income year a deduction can only be claimed where the sum of assessable income, reportable fringe benefits total, and (from 1 July 2009) reportable employer superannuation contributions attributable to the 'employment' activities is less than 10% of the total of the person's assessable income, reportable fringe benefits total and reportable employer superannuation contributions in the income year that the contribution is made. … 65. In the application of the maximum earnings test, the relevant 'employment' activity need not be an activity in Australia. For a non-resident, the income attributable to employment outside Australia is not assessable income in Australia and so will not be counted in the maximum earnings test. A non-resident with Australian sourced income that is not attributable to 'employment' activities may therefore be able to deduct a personal superannuation contribution made to an Australian superannuation provider against their Australian sourced income. From the facts, you are a non-resident for taxation purposes, you work full-time overseas and your salary is not taxed in Australia. As discussed above the income attributable to employment outside Australia is not assessable income in Australia and so will not be counted in the maximum earnings test. Therefore your income attributable to employment overseas is not assessable income in Australia and will not be counted in the maximum earnings test. Therefore you meet the condition under section 290-160 of the ITAA 1997. | Detailed Reasoning - Age-related conditions: Section 290-165 of the ITAA 1997 requires a taxpayer (over the age of 18) to have made the contribution before the day that is 28 days after the end of the month in which they turn 75 years of age. As you are under 75 years of age in the 2016-17 income year in which the contribution will be made, the condition under section 290-165 of the ITAA 1997 has been met. Whilst you will not be subject to the maximum earning test under section 290-160 of the ITAA 1997 and have satisfied the age-related requirement of section 290-165 of the ITAA 1997, the conditions in sections 290-155 and section 290-170 of the ITAA 1997 must also be satisfied for you to claim a deduction in the 2016-17 income year. | Detailed Reasoning - Complying superannuation fund condition: Section 290-155 requires that the contribution must be made to a complying superannuation fund. | Detailed Reasoning - Notice of intent to deduct conditions: Section 290-170 of the ITAA 1997 requires a person to provide a valid notice of their intention to claim the deduction to the trustee of their superannuation fund. This notice must be given before the earlier of: • the date they lodge their income tax return for the income year in which the contribution was made; or • the end of the income year following the year in which the contribution was made. In addition, they must also receive an acknowledgement of the notice by the trustee of the superannuation fund. Therefore if you also meet all the conditions under sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997, you may claim a deduction for personal superannuation contributions under section 290-150 of the ITAA 1997 for the 2016-17 income year. However, the deduction for personal superannuation contributions cannot create or increase a tax loss. | Detailed Reasoning - Concessional contributions cap: Concessional contributions made to a complying superannuation fund are subject to an annual cap. The concessional contributions cap for the 2016-17 income year is $XX,000 for individuals XYyears of age or over on June 2016. Any amount contributed above the concessional contributions cap will be added to an individual's assessable income and taxed at their marginal tax rate. From the facts you are over XY years of age, therefore your concessional contributions cap for the 2016-17 income year is $XX,000. If you are entitled to claim a deduction for personal superannuation contributions, the maximum that you can contribute in the 2016-17 income year without exceeding the concessional contributions cap is $XX,000. As mentioned above, the deduction for personal superannuation contributions cannot create or increase a tax loss. It should also be noted that once the concessional contributions are in your superannuation fund, they are taxed at a rate of 15%. | Detailed Reasoning - Further issues for you to consider: There may be changes to concessional contributions from 1 July 2017 that were announced in the Budget measures on 3 May 2016. However we can only provide advice on matters that is in the current income tax legislation. Unfortunately we cannot provide advice on the Budget measures as they are not current legislation.