Private ruling: Deducting personal contribution
Date of advice: 7 November 2017
Published: March 2018
Ruling period: Income year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: 1. Will the repayment of overpaid income result in a decrease in your income as an employee from your employer in the 2016-17 income year? 2. Can you claim a deduction in respect of personal superannuation contributions made in the 2016-17 income year under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)? 3. Can you claim employer contributions as a deduction in respect of personal superannuation contributions in the 2016-17 income year under section 290-150 of the ITAA 1997? | A1: 1. Yes. 2. Yes. 3. No.

Relevant facts and circumstances: In the 2016-17 income year, your employer (the Employer) overpaid you a certain amount (the Overpaid Amount) which was salary sacrificed into your self-managed superannuation fund (the Fund). The Overpaid Amount was reported as Employer contribution via Super Stream. As the Overpaid Amount cannot now be returned from the Fund, you will repay the Employer from your own personal bank account. You state that after repayment of the Overpaid Amount to the Employer, you will meet the maximum earnings as an employee condition for the 2016-17 income year. You intend to claim the employer contributions as a deduction for personal contribution for the 2016-17 income year. During the 2016-17 income year, you also made personal superannuation contributions to the Fund. You have advised that you have not lodged your 2016-17 income tax return. You will lodge a valid notice of intent to deduct contributions with the trustee of the Fund prior to the date you lodge your 2016-17 income tax return and you will ensure you receive an acknowledgment of that notice. You met the age related conditions at all times during the 2016-17 income year. You confirm the proposed deduction for personal superannuation contributions will not add to, or create, a loss. Assumptions None.

Relevant legislative provisions: 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 | Superannuation Guarantee (Administration) Act 1992 Subsection 12(1)

Reasons for decision: Summary: Provided that you obtain an amended payment summary with the correct payments you are entitled to, or you receive a letter from the Employer correcting the payment summary, your reported income as an employee from the Employer in the 2016-17 income year will be decreased. As all of the conditions for deductibility under section 290-150 of the ITAA 1997 have been satisfied in relation to the 2016-17 income year, you may claim a deduction for personal superannuation contributions you made to the Fund in the 2016-17 income year. You cannot claim a deduction for the employer contributions because it was the Employer and not you who made those contributions to the Fund. | Detailed Reasoning - Question 1: You are not entitled to income if you are paid an amount due to an error or mistake. For example: ● the government mistakenly overpays your taxable pension, allowance or payment. ● your employer mistakenly overpays salary. In this case the amount does not have to be repaid before amending your tax return. The Employer should give you either an amended payment summary or a letter correcting the payment summary that they had previously issued. You should provide a copy of this with any amendment or objection request. Provided that you obtain an amended payment summary with the correct payments you are entitled to, or you receive a letter from the Employer correcting the payment summary, your reported income as an employee from the Employer in the 2016-17 income year will be decreased. | Detailed Reasoning - Personal deductible superannuation contributions: A person can claim a deduction for personal contributions they made to a superannuation fund for the purpose of providing superannuation benefits for themselves, (or their dependants after their death) under section 290-150 of the ITAA 1997. However, the conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997 must also be satisfied for the person to claim the deduction. | 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, it must be made to a complying superannuation fund for the income year of the fund in which the contribution is made. In this case, the personal contributions and employer contributions were made to the Fund which is a complying superannuation fund. Therefore, this requirement is satisfied. | 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 , then less than 10% of the total of their assessable income, reportable fringe benefits and reportable employer superannuation contributions for the income year must be attributable to those activities. You state that, after repayment to the Employer, you will meet the maximum earnings as an employee condition in the 2016-17 income year. Consequently, section 290-160 of the ITAA 1997 will be satisfied. | Detailed Reasoning - Age-related conditions: For a person who is older than 18 years, 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. You met the age related conditions at all times during the 2016-17 income year. | 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. The notice must be given before the earlier of: ● the date the person lodges their income tax return for the income year in which the contribution was made; or ● the end of the next income year. In addition, the person must also have been given an acknowledgement of the notice by the trustee of the superannuation fund. You have advised that you have not lodged your 2016-17 income tax return and you will lodge a valid notice with the trustee of the Fund prior to the date you lodge your income tax return. You will ensure you receive an acknowledgment of that notice. Therefore, this condition will be satisfied. Based on the above, you may deduct the contributions you made to the Fund in the 2016-17 income year because all of the conditions for deductibility under section 290-150 of the ITAA 1997 have been satisfied for the 2016-17 income year. However, you cannot deduct the employer contributions for the 2016-17 income year because you did not make those contributions. Those contributions were made by the Employer, and correctly reported as employer contributions. The repayment of the overpaid amount to the Employer does not change the nature of these contributions. If the Employer contributions were returned by the trustee of the Fund, and you then make a contribution of an equal amount to the Fund, the contributions cannot be taken to have been made in the 2016-17 income year as the 2016-17 income year has already ended. Therefore, you cannot claim a deduction for the employer contributions as a personal superannuation contribution for the 2016-17 income year.