Private ruling: Deductibility of personal superannuation contributions
Published: February 2013
Ruling period: 2011-12 income year.
Date scheme commenced: 1 July 2011

Ruling: Q1: Can your client claim a deduction in respect of personal superannuation contributions for the relevant income year under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No.

Relevant facts and circumstances: Your client was self-employed until the final months of the relevant income year, and it was their intention to remain self-employed for the entire relevant income year. Your client contributed a sum of money to their superannuation fund in which they intended to claim a personal deduction. In the later part of the relevant income year, your client commenced employment. Income received from the employment activities are more than 10% of their total assessable income for the relevant income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 290-150 . | Income Tax Assessment Act 1997 Subsection 290-150(1). | 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 Section 290-165. | Income Tax Assessment Act 1997 Section 290-170.

Reasons for decision: Summary: Your client is not entitled to claim a deduction for personal superannuation contributions in the relevant income year because they have not satisfied the maximum earnings as an employee condition . Your client's income from employment activities is not less than 10% of his assessable income for the year. | Detailed Reasoning - Personal deductible superannuation contributions:: A person must satisfy the conditions in section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) before they can claim a deduction in respect of personal contributions made for the purpose of providing superannuation benefits for themselves, or their dependants after their death. However, subsection 290-150(2) of the ITAA 1997 provides that the conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997 must be satisfied before a person can claim a deduction for the contributions made in that income year. | Detailed Reasoning - Maximum earnings as an employee condition:: The condition in section 290-160 of the ITAA 1997 requires that if a taxpayer is engaged in any activities that result in them being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA) then less than 10% of the total of their assessable income and reportable fringe benefits must be attributable to those activities. Subsection 290-160(1) 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 appointment; (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 has not been enacted). In this case your client was employed for the latter part of the relevant income year. It is noted that your client's intention was to remain self-employed for the duration of the relevant income year. However, as your client was engaged in employment during the income year, they will still be an employee for the purposes of the SGAA during the relevant income year. Consequently, section 290-160 of the ITAA 1997 applies to your client in the relevant income year. Where section 290-160 of the ITAA 1997 applies to a person, subsection 290-160(2) of the ITAA 1997 states that: To deduct the contribution, less than 10% of the total of the following must be attributable to the activities: (a) your assessable income for the income year; (b) your reportable fringe benefits total for the income year; (c) the total of your reportable employer superannuation contributions for the 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 and reportable fringe benefits attributable to their employment must be less than 10% of his total assessable income and reportable fringe benefits for the relevant income year. In the relevant income year, you have advised that the income relating to your client's employment activities is not less than 10% of their total assessable income and reportable fringe benefits. As your client's employment income will be greater than ten percent of their total assessable income and reportable fringe benefits for the relevant income year, section 290-160 of the ITAA 1997 will not be satisfied. The legislation itself is quite specific. It allows a deduction, subject to the necessary requirements, notably only where less than 10% of a person's assessable income and reportable fringe benefits are attributable to those activities of an employee. The legislation does not contain a discretion that can be exercised by the Commissioner to allow a deduction where the maximum earnings condition as an employee is not met. As the condition in section 290-160 of the ITAA 1997 has not been satisfied, and all the conditions in subsection 290-150(2) of the ITAA 1997 must be satisfied in order to claim a deduction, it is not necessary to determine whether the conditions of 290-165 and 290-170 of the ITAA 1997 have been satisfied. | Detailed Reasoning - Conclusion:: As your client has not satisfied all the conditions in section 290-150 of the ITAA 1997, they are not eligible to claim a deduction for any personal superannuation contributions made in the relevant income year.

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