Private ruling: Deductibility of personal super contributions
Date of advice: 28 October 2015
Published: October 2015
Ruling period: Income year ended 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q2: Will personal contributions made to a constitutionally protected fund for which a tax deduction is claimed count towards either the Taxpayer's concessional contributions cap or the Taxpayer's non-concessional contributions cap? | A2: No

Relevant facts and circumstances: The Taxpayer is a member of a complying superannuation fund (the Fund). The Fund is a constitutionally protected fund (CPF). The Taxpayer has been advised by the Fund that it will accept personal contributions from the Taxpayer, as a member. The Taxpayer intends to make the superannuation contribution to increase their superannuation balance in preparation for retirement in the future. The Taxpayer has confirmed that they intend to make a personal contribution to the Fund in the 20XX-YY income year. The Taxpayer intends to provide the trustees of the Fund with a written notice of intent to claim a deduction for the personal contribution they will make in the 20XX-YY income year, and accordingly expects to receive an acknowledgment from the Fund. The Taxpayer states the amount intended to be claimed as a deduction in respect of the personal superannuation contribution to the Fund will not add to or create a loss in the 20XX-YY income year. The Taxpayer has advised that, in the 20XX-YY income year, they will earn the majority of their assessable income from investment income, and a small amount of income as an employee. This employment income will constitute less than 10% of the Taxpayer's total assessable income and reportable fringe benefits for the 20XX-YY income year. The Taxpayer will be under 75 years of age in the 20XX-YY income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 26-55(2) | 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 | Income Tax Assessment Act 1997 Subparagraph 291-25(2)(c)(iii) | Income Tax Assessment Act 1997 Subparagraph 291-25(2)(c)(iv) | Income Tax Assessment Act 1997 Subsection 307-220(1) | Income Tax Assessment Act 1997 Subsection 307-220(2)

Reasons for decision: Summary: Based on the information, the Taxpayer will be able to claim a deduction for the personal superannuation contribution they intend to make in the 20XX-YY income year, provided that all the conditions are satisfied. Contributions made to a constitutionally protected fund (CPF) are neither concessional contributions nor non-concessional contributions. As such, the proposed contributions to the Fund will not count towards the Taxpayer's concessional contributions cap or their non-concessional contributions cap for the 20XX-YY income year. | Detailed Reasoning - Personal deductible superannuation contributions: A person can claim a deduction for personal contributions made to a superannuation fund for the purpose of providing superannuation benefits for themselves under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997). However, the conditions in sections 290-155, 290-160 (if applicable), 290-165 and 290-170 must also be satisfied for the person to claim the deduction. | Detailed Reasoning - Maximum earnings as an 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: n assessable income n reportable fringe benefits total and n 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 facts provided in this case indicate that the amounts attributable to employment related activities which the Taxpayer will receive in the 20XX-YY income year will be less than 10% of their total assessable income and reportable fringe benefits in that income year. Accordingly, the Taxpayer will satisfy the maximum earnings test under section 290-160 of the ITAA 1997 for the 20XX-YY income year. | 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 instance, the Taxpayer intends to make a personal contribution to a complying superannuation fund. Therefore, the condition in section 290-155 of the ITAA 1997 will be satisfied for the 20XX-YY income year. | Detailed Reasoning - Age-related conditions: Relevantly, 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. The Taxpayer will be under 75 years of age during the 20XX-YY income year when the contributions were made. Therefore the Taxpayer satisfies the age-related conditions for the contributions in the 20XX-YY income year. | Detailed Reasoning - Notice of intent to deduct conditions: According to section 290-170 of the ITAA 1997, in order to deduct a contribution, the Taxpayer is required to provide to the trustees of the Fund a valid notice in the approved form, of her intention to claim a deduction. The notice must be given by the earlier of: (a) the date the Taxpayer lodges their income tax return for the income year in which the contribution is made; or (b) the end of the following income year. The Taxpayer must also be given an acknowledgment of receipt of the notice by the trustees of the Fund. A notice of intent to deduct for the Taxpayer's contributions will not be valid if one or more of the following conditions in subsection 290-170(2) of the ITAA 1997 are satisfied: (a) the notice is not in respect of the contribution; (b) the notice includes all or part of an amount covered by a previous notice; (c) when you gave the notice: (i) you were not a member of the fund or the holder of the RSA; or (ii) the trustee or RSA provider no longer holds the contribution; or (iii) the trustee or RSA provider has begun to pay a superannuation income stream based in whole or part on the contribution; (d) before you gave the notice: (i) you had made a contributions splitting application... in relation to the contribution; and (ii) the trustee or RSA provider had not rejected the application. In relation to the contributions in the 20XX-YY income year, provided that the Taxpayer: (a) gives valid notices of intent to the trustees of the Fund within the time frames previously discussed; and (b) the trustees of the Fund duly acknowledge those notices; it is accepted that section 290-170 of the ITAA will be satisfied. Based on the information provided, the Taxpayer will satisfy the conditions under sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997. So long as the Taxpayer's circumstances do not change, they will be allowed to claim a deduction for the proposed personal superannuation contribution to the Fund in the 20XX-YY income year. | Detailed Reasoning - Deduction limits: The allowable deduction is limited under subsection 26-55(2) of the ITAA 1997 to the amount of assessable income remaining after subtracting all other deductions (excluding previous year's tax losses and any deductions for farm management losses) from a Taxpayer's assessable income. Thus a deduction for personal superannuation contributions cannot add to, or create, a loss. According to the facts of this case, the deductions claimed by the Taxpayer in relation to the proposed contributions will not add to or create a loss in the 20XX-YY income year. | Detailed Reasoning - Contribution limits: It is noted that the Fund is a CPF. Subparagraph 291-25(2)(c)(iii) of the ITAA 1997 specifically excludes contributions made to a CPF from the definition of concessional contributions. This means that the Taxpayer's proposed contributions to the Fund will not be concessional contributions. In view of this, the proposed contribution to the Fund in the 20XX-YY income year will not count towards the Taxpayer's concessional contributions cap for the income year. Subparagraph 292-90(2)(c)(iv) of the ITAA 1997 specifically excludes 'a contribution made to a CPF (other than a contribution included in the contributions segment of your superannuation interest in the fund)' from the definition of a non-concessional contribution. Subsection 307-220(1) of the ITAA 1997 defines the 'contributions segment of a superannuation interest' as: so much of the value of the interest as consists of contributions made after 30 June 2007, to the extent that they have not been and will not be included in the assessable income of the superannuation provider in relation to the superannuation plan in which the interest is held. However, the operation of subsection 307-220(2) of the ITAA 1997 provides that for a CPF, the only contributions that would be included in the contributions segment are contributions that would be non-concessional contributions if the fund was not a CPF. Therefore, in the Taxpayer's case, if the Fund was treated as if it was not a CPF, the contributions in the 20XX-YY income year would be included in the assessable income of the Fund and therefore would not form part of the Taxpayer's contributions segment. Hence, the contributions segment of the Taxpayer's superannuation interest in the Fund would therefore be nil. Since the contribution that the Taxpayer intends to make to the Fund would not be part of the contributions segment of the Taxpayer's superannuation interest in the Fund, the contributions do not fall under the definition of a non-concessional contribution. In view of this, the proposed contribution to the Fund in the 20XX-YY income year will not count towards the Taxpayer's non-concessional contributions cap for the income year.

Question 1: Is the Taxpayer entitled to claim a deduction under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of the personal superannuation contributions made during the 20XX-YY income year?