Private ruling: Deductibility of Personal Superannuation Contributions
Date of advice: 15 September 2016
Published: November 2016
Ruling period: Income year ended 30 June 2017; and | Income year ended 30 June 2018
Date scheme commenced: 1 July 2016.

Ruling: Q1: Can you claim a deduction for proposed personal superannuation contributions to be made to your constitutionally protected fund (CPF) in the 2016-17 and 2017-18 income years? | A1: Yes.

Relevant facts and circumstances: You operate a private business. You will not be engaged in employment activities in the 2016-17 and 2017-18 income years. You are a member of a fund (the Fund), a complying superannuation fund. The Fund is a constitutionally protected fund (CPF) administered by a superannuation board. You intend to make a contribution to the Fund for the 2016-17 and 2017-18 years respectively. You intend to provide the trustees of the Fund with valid notices of intent to claim a deduction for the proposed personal contributions to be made in each of the 2016-17 and 2017-18 income years. In response you expect to receive an acknowledgement from the Fund for each of these notices. You will be under 75 years of age in both the 2016-17 and 2017-18 income years.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 290-150. | 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 section 290-175. | Income Tax Assessment Act 1997 section 291-25(2)(c)(iii). | Income Tax Assessment Act 1997 section 292-90(2)(c)(iv). | Income Tax Assessment Act 1997 section 307-220(2).

Reasons for decision: Summary: You can claim a deduction for the superannuation contributions you intend to make in the 2016-17 and 2017-18 income years respectively as you will satisfy all the conditions of section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997). | Detailed Reasoning - Personal contributions deduction: A person can claim a deduction for personal contributions made to their superannuation fund for the purposes of providing superannuation benefits for themselves under section 290-150 of the ITAA 1997. However, subsection 290-150(2) of the ITAA 1997 requires that the conditions in sections 290-155, 290-160 (if applicable), 290-165 and 290-170 must all be satisfied in order to claim a contribution as a deduction. | Detailed Reasoning - Complying superannuation fund condition: Section 290-155 of the ITAA 1997 requires that where a contribution is made to a superannuation fund, the fund must be a complying superannuation fund for the income year in which the contribution is made. You are a member of the Fund and intend to make your contributions to this superannuation fund. The Fund is an exempt public section superannuation scheme, and is a complying superannuation fund for the relevant income years. Thus, this condition is satisfied. | Detailed Reasoning - Maximum earnings as an employee condition: Subsection 290-160(1) of the ITAA 1997 sets out a test, known as the maximum earnings test, which must be satisfied in order to claim a deduction for a contribution made to the superannuation fund. The test applies to any person who makes a contribution in an income year and is engaged in any of the following activities: • Holding an office or appointment; • Performing functions or duties; • Engaging in work; • Doing acts or things; and these activities result in that person being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA). Where a person is engaged in employment activities in the income year in which they make a contribution any income attributable to the following activities: • Their assessable income for the income year; • Their reportable fringe benefits (RFB) for the income year; and • The total of their reportable employer superannuation contributions for the income year, Must be less than 10% of the person's total income for that income year. Taxation Ruling TR 2010/1 Income Tax: Superannuation Contributions (TR 2010/1) outlines the Commissioner's view on the requirements to be satisfied for a deduction of superannuation contributions. In discussing the maximum earnings test, the Commissioner states at paragraph 58 that: Those persons who have not engaged in an 'employment' activity in the income year in which they make a contribution, such as persons who although receiving worker's compensation payments are not employed at any time during the year, are not subject to the maximum earnings test. You have advised that you will not be engaged in any employment activities in the 2016-17 or the 2017-18 income years. Consequently, section 290-160 of the ITAA 1997 will not apply to you in determining the deductibility of your superannuation contributions. | Detailed Reasoning - Age-related conditions: 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 contributions turns 75 years of age. As you will be under the age of 75 for these years, you will satisfy the age related conditions. | Detailed Reasoning - Notice of intent to deduct: In order to claim a deduction, section 290-170 requires that a valid notice, in the approved for, must be provided to your fund trustee. Subsection 290-170(1) of the ITAA 1997 requires that a valid notice, in the approved form, must be provided to your fund trustee by the earlier of: • The day on which you lodge your income tax return for the income year in which you make a contribution; or • The end of the income year following the year in which the contribution is being made (being, in this instance, the 2017-18 and 2018-19 income years respectively). Subsection 290-170(1)(c) of the ITAA 1997 requires that the trustee must provide an acknowledgement of their receipt of the contribution made by you. Subsection 290-170(2) of the ITAA 1997 also requires that the following conditions be satisfied for a notice of intent to deduct to be valid: • The notice be in respect of the contribution; • The notice is not for an amount covered by a previous notice; • At the time the notice is given, you are: • A member of the fund; or • The fund trustee holds the contribution; • Before the notice is given: • A contributions splitting application has not been made in relation to the contribution; and • The fund trustee has not rejected the contribution. You have advised that you intend to provide a valid notice of intent to claim a deduction to the Fund for the contribution you intend to make in both the 2016-17 and 2017-18 income years. Provided that the notice is lodged before your income tax return is lodged or by the end of the income year following that in which the contributions were made, and the trustee duly acknowledges receipt of your notice, the conditions in section 290-170 of the ITAA 1997 will be satisfied. | Detailed Reasoning - Deductions limits: Section 290-175 of the ITAA 1997 provides that the deduction cannot be more than the amount specified in the notice of intent to deduct a contribution. Provided the amount of the deduction you intend to claim does not exceed the amount specified in the notice of intent to claim a deduction, you will satisfy this requirement. The allowable deduction is also 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. | Detailed Reasoning - Conclusion: As you will satisfy all the conditions required by section 290-150 of the ITAA 1997, you will be able to claim a deduction in the 2016-17 and 2017-18 income years for the entire personal contribution you intend to make to the Fund in those income years.