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

Ruling: Q1: Is your client entitled to claim a deduction for personal contributions to an Australian superannuation fund where they are employed overseas by a non-resident employer who does not provide superannuation support? | A1: No.

Relevant facts and circumstances: Your client is employed in a foreign country by a company based in that foreign country (the Company). Your client is a contract employee of the Company and is treated as an employee for the purposes of section 12 the Superannuation Guarantee (Administration) Act 1992 (SGAA). The Company does not pay superannuation on behalf of your client. In the 2011-12 income year, your client earned $[amount] in salary and wages from the Company. You state that this amount will represent at least 10% of your client's total assessable income. Your client's only other income for the relevant period is interest earnings of $[amount]. In the 2011-12 income year, your client contributed $[amount] to a complying superannuation fund from his personal account. In respect of this amount, your client wishes to claim a personal deduction of $[amount] Your client is over 60 years of age.

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 an employee for the purposes of the Superannuation Guarantee legislation and his income from employment activities represent more than 10% of his assessable income for the year. As your client has not satisfied the maximum earnings as an employee condition he is not entitled to claim a deduction for personal superannuation contributions in the 2011-12 income 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 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: n (i) holding an office or appointment; n (ii) performing functions or appointment; n (iii) engaging in work; n (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). From the facts provided, your client is a contract employee of the Company and is treated as an employee for the purposes of section 12 the Superannuation Guarantee (Administration) Act 1992 (SGAA). Consequently, section 290-160 of the ITAA 1997 applies to your client in the 2011-12 income year. Where section 290-160 of the ITAA 1997 applies to a person, subsection 290-160(2) 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 his employment must be less than 10% of his total assessable income and reportable fringe benefits for the 2011-12 income year. In the 2011-12 income year, you have advised the total payments your client received as an employee totalled $[amount]. Further, you have advised that your client's total assessable income was $[amount] in the same period. This includes $[amount] (income attributable to employment) and $[amount] (interest). Therefore, the income relating to your client's employment activities equals: $[amount] $[amount] $[amount] $[amount] = X% of his total assessable income and reportable fringe benefits in the 2011-12 income year. As your client's employment income will be greater than ten percent of his total assessable income and reportable fringe benefits for the 2011-12 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 satisfying the necessary legislative requirements - notably, in the case of an employee, the requirement that less than 10% of the person's total assessable income and reportable fringe benefits are attributable to those activities as an employee. The legislation does not contain a discretion that can be exercised by the Commissioner to allow a deduction where the maximum earnings as an employee condition is not met. As noted earlier, in order to be able to claim a deduction under section 290-150 of the ITAA 1997 all the conditions in subsection 290-150(2) of the ITAA 1997 must be satisfied. Failure to satisfy just one of the necessary conditions will prevent a deduction from being able to be claimed. In the present case, the maximum earnings as an employee condition has not been met. Therefore, it is not necessary to determine whether any of the other conditions listed in subsection 290-150(2) 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, he is not eligible to claim a deduction for any personal superannuation contributions made in the 2011-12 income year.