Private ruling: Deduction for personal superannuation contributions
Published: November 2011
Ruling period: Year ending 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q2: Is your client entitled to receive the government co-contribution? Advice/Answer The Commissioner declines to rule.


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. | Superannuation Guarantee (Administration) Act 1992 Subsection 12(1). | Superannuation Guarantee (Administration) Act 1992 Subsection 12(3).

Reasons for decision: Detailed Reasoning - Summary of decision: Your client's income relating to employment is greater than ten percent of their total assessable income and reportable fringe benefits for the 2010-11 income year. Therefore, your client is not eligible to claim a deduction for any personal superannuation contributions made in the 2010-11 income year. | Detailed Reasoning - Personal deductible superannuation contributions:: A person must satisfy the conditions in subsection 290-150(1) 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. 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 is 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: · in the income year in which you make the contribution, you engage in any of these activities: · holding an office or appointment; · performing functions or appointment; · engaging in work; · doing acts or things; and · 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). Subsection 12(1) of the SGAA states that the terms employer and employee have their ordinary meaning. Subsections 12(2) to (11) of the SGAA expand the meaning of those terms and make provision to avoid doubt as to the status of certain persons. In particular, subsection 12(3) states: 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. Paragraph 11 of Superannuation Guarantee Ruling SGR 2005/1 makes the following comment regarding subsection 12(3) of the SGAA: For the purposes of subsection 12(3), where the terms of the contract in light of the subsequent conduct of the parties indicate that: · the individual is remunerated (either wholly or principally) for their personal labour and skills; · the individual must perform the contractual work personally (there is no right of delegation); and · the individual is not paid to achieve a result, · the contract is considered to be wholly or principally for the labour of the individual engaged and he or she will be an employee under that subsection. Paragraph 24 of SGR 2005/1 states: The relationship between an employer and employee is a contractual one. It is often referred to as a contract of service . Such a relationship is typically contrasted with the principal/independent contractor relationship that is referred to as a contact for services . An independent contractor typically contracts to achieve a result whereas an employee contracts to provide their labour (typically to enable the employer to achieve a result). During the 2010-11 income year your client received amounts from a number of payers. You provide that your client worked under a verbal contract with all payers and no written contracts were put in place. In addition, your client worked for all payers on the basis of an hourly rate and he was paid only for his labour. Further, when working for an hourly rate your client worked at the direction of each payer. Therefore, it is considered that your client is being remunerated wholly for their personal labour and skills. Further, your client was not able to delegate work to others and apart from one payer there is no indication that your client is being paid to achieve a specific result. In light of the above, it is considered that your client is working under a contract that is wholly or principally for their labour for a number of payers. Therefore, your client is an employee of those payers for the purposes of the SGAA. 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 their total assessable income and reportable fringe benefits for the 2010-11 income year. Your client's income relating to employment is greater than ten percent of their total assessable income and reportable fringe benefits for the 2010-11 income year. Consequently, section 290-160 of the ITAA 1997 will not be satisfied. As the condition in section 290-160 of the ITAA 1997 has not been satisfied, and all the conditions set out 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 other conditions have been satisfied. Therefore, your client is not eligible to claim a deduction for any personal superannuation contributions made in the 2010-11 income year. | Detailed Reasoning - Detailed reasoning: The Commissioner can only provide a private ruling in response to a valid application. For the following reasons we will not be making your private ruling in respect of Question 2 raised in your application. Division 359 of Schedule 1 to the Taxation Administration Act 1953 (TAA) provides that a private ruling is a written statement of the Commissioner's opinion of how a relevant provision applies, or would apply, to a particular entity in relation to a specified scheme. Provisions that are relevant for rulings are provisions about certain laws administered by the Commissioner. These provisions are the following: · income tax · medicare levy · fringe benefits tax · franking tax · withholding tax · mining withholding tax · the administration or collection of those taxes · a grant or benefit mentioned in section 8 of the Product Grants and Benefits Administration Act 2000 , or the administration or payment of such a grant or benefit. The issues you have raised in question 2 of the private ruling do not involve a relevant provision for the purposes of the TAA. Therefore, the Commissioner is unable to rule on the matters the applicant has raised. The superannuation co-contribution is a government initiative to help eligible individuals boost their super savings for the future. A low or middle-income earner can take advantage of the superannuation co-contribution payment by making eligible personal super contributions to their superannuation fund or retirement savings account (RSA). Individuals do not need to apply for the superannuation co-contribution. If you are eligible, all you need to do is make personal superannuation contributions to your superannuation fund or retirement savings account and lodge an income tax return. You may be eligible for the super co-contribution if all of the following apply: · you make an eligible personal super contribution by during the income year into a complying super fund or RSA and don't claim a deduction for all of it · your total income (minus any allowable business deductions) for the income year is less than the higher income threshold ($61,920 for the 2010-11 income year) · 10% or more of your total income comes from eligible employment-related activities, carrying on a business or a combination of both · you are less than 71 years old at the end of the income year · you are not the holder of a temporary visa at any time during the income year, unless you are a New Zealand citizen or holder of a prescribed visa · you lodge your income tax return for the relevant income year. Your superannuation fund needs your tax file number (TFN) before it can accept your personal contribution or a superannuation co-contribution. In the 2010-11 income year the maximum superannuation co-contribution entitlement is $1,000. However, individuals must reduce this by 3.333 cents for every dollar their total income, less allowable business deductions, is over $31,920.

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. | Question 1: Can your client claim a deduction in respect of personal superannuation contributions for the 2010-11 income year under section 290-150 of the Income Tax Assessment Act 1997 ? | Your client worked for all payers on the basis of an hourly rate and was paid only for his labour. | None of the payers were associated in any way with each other and/or with your client. | During the 2010-11 income year your client contributed an amount to their superannuation fund.