Private ruling: Deductibility of personal superannuation contributions
Date of advice: 14 October 2016
Published: January 2017
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can a deduction be claimed for personal superannuation contributions made to a constitutionally protected fund in the 20XX-20YY income year under section 290-150 of the Income Tax Assessment Act 1997 ? | A1: Yes | Q2: Will personal contributions made to a constitutionally protected fund for which a tax deduction claimed under section 290-150 of the ITAA 1997 count towards your client's concessional contributions cap or non-concessional contributions cap? | A2: No

Relevant facts and circumstances: During the 20XX-YY income year your Client was self-employed and also performed work which resulted in their being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992. You have indicated that your Client's income from employment activities represented less than 10% of the total of their: ● assessable income for the income year; ● reportable fringe benefits for the income year; and ● total reportable employer superannuation contributions for the income year. Your client is a member of a Superannuation Fund (the Fund). The Fund is a constitutionally protected fund (CPF). The Fund is also an exempt public sector superannuation scheme and a complying superannuation fund. During the 20XX-YY income year, your Client made a personal contribution to the Fund. Your Client provided the trustee of the Fund with a valid notice of the intention to claim a tax deduction for the personal contribution made in the 20XX-YY income year. Your Client received a notice from the trustee of the Fund acknowledging the receipt of your Client's notice regarding the personal contribution. The deduction claimed by your Client for the personal superannuation contribution will not add to or create a loss in the 20XX-YY income year. The contributions segment of your Client's superannuation interest in the Fund is nil. Your Client is under the age of 75.

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 Section 290-175 | Income Tax Assessment Act 1997 Subparagraph 290-25(2)(c)(iv) | Income Tax Assessment Act 1997 Subparagraph 291-25(2)(c)(iii) | Income Tax Assessment Act 1997 Subsection 307-220(1) | Income Tax Assessment Act 1997 Subsection 307-220(2)

Reasons for decision: Summary: Your Client can claim a deduction in the 20XX-YY income year for the personal contribution made to the constitutionally protected fund (CPF) during that income year. Contributions made to a constitutionally protected fund (CPF) are neither concessional contributions nor non concessional contributions. Accordingly, any personal super contributions made to the CPF will not count towards the concessional contributions cap in the 20XX-YY income year. | Detailed Reasoning - Detailed reasoning: Subsection 290-150(1) of the Income Tax Assessment Act 1997 (ITAA 1997) states that a person can claim a deduction for personal contributions made to a superannuation and for the purpose of providing superannuation benefits for themselves. However subsection 290-150(2) of the ITAA 1997 provides the conditions in sections 290-155, 290-160, 290-154 and 290-170 must all be satisfied before the person can claim a deduction for the contributions made in that income year. Further, Taxation Ruling TR 2010/01 “ Income Tax: Superannuation Contributions ” (TR 2010/1) provides a more detailed explanation of the aforementioned conditions. | 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 in which you made the contributions. Your Client has made a personal contribution to the Fund in the 20XX-YY income year. The facts have established that the Fund is a complying superannuation fund. Therefore, this condition 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 (SGAA), then less than 10% of the total of the following must be attributable to those 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 (RESC) for the income year. The term 'reportable employer superannuation contributions' includes salary sacrifice contributions made for the person's benefit in that income year. This calculation is referred to as the 'maximum earnings test'. In TR 2010/1, the Commissioner discusses the operation of the maximum earnings as employee condition. In paragraph 58 of TR 2010/1 the Commissioner states that those persons who have not engaged in an 'employment' activity in the income year in which they make a contribution are not subject to the maximum earnings test. The employment activity condition outlined in subsection 290-160(1) of the ITAA 1997 has two parts. To satisfy this condition, therefore, a taxpayer must both: ● engage in any of the employment activities specified in paragraph 290-160(1)(a) of the ITAA 1997; and ● as a result be treated as an employee for the purposes of the SGAA, as specified in paragraph 290-160(1)(b) of the ITAA 1997. You have advised that while your Client remains self-employed, your Client also performed work where the Client was treated as an employee for the purposes of SGAA during the 20XX-YY income year. Nonetheless, you have stated that the level of your Client's employment related income represents less than 10% of the total of their: ● assessable income for the income year; ● reportable fringe benefits for the income year; and ● total reportable employer superannuation contributions for the income year. On this basis, the maximum earnings condition has been met by your Client in the 20XX-YY income year and your Client will not be denied a deduction for personal superannuation contributions in terms of section 290-160 of the ITAA 197 for that year. | 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 contribution turns 75 years of age. At the time your Client made the personal contribution to the Fund in the 20XX-YY income year, your Client was under the age of 75. 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: Section 290-170 of the ITAA 1997 prescribes the notice of intent conditions which need to be satisfied to claim a deduction for superannuation contribution. Subsection 290-170(1) of the ITAA 1997 requires a valid notice of intent to claim a deduction in the approved form be given to the superannuation fund. The notice must be provided before the taxpayer lodges his or her income tax return for the year or within 12 months of the end of the income year if the taxpayer had not lodged his or her return by that time. The trustee must also acknowledge receipt of the notice. Subsection 290-170(2) of the ITAA 1997 requires the following conditions to be satisfied for a notice of intent to deduct to be valid: (a) the notice is not in respect of the contribution; (b) the notice includes all or a 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 (within the meaning given by the regulations) in relation to the contribution; and (ii) the trustee or RSA provider to which you made the application had not rejected the application. As identified in the facts, the notice of intent conditions have been satisfied as your Client lodged a notice of intent to the Fund trustee and the trustee duly acknowledged this notice. | 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. Therefore a deduction for personal superannuation contributions cannot add to or create a loss. According to the facts of this case, the deduction claimed by your Client in relation to the contribution will not add to or create a loss in the 20XX-YY income year. On the facts provided, it is accepted that your Client will satisfy all the required conditions in subdivision 290-C of the ITAA 1997, in regards to the personal contribution made to the Fund in the 20XX-YYincome year. | Detailed Reasoning - Contribution limits: It is noted that the Fund is a constitutionally protected fund (CPF). Subparagraph 291-25(2)(c)(iii) of the ITAA 1997 excludes contributions made to a CPF from the definition of concessional contributions. Similarly, the operation of subparagraph 292-90(2)(c)(iv) of the ITAA 1997, when read in conjunction with subsections 307-220(1) and 307-220(2) of the ITAA 1997, excludes a contribution made to a CPF from the definition of a non-concessional contribution: In view of this, the contribution to the Fund will not count towards your Client's concessional contributions cap or non-concessional contributions cap for the 20XX-YY income year.