Private ruling: Personal superannuation contributions
Published: August 2014
Ruling period: Income year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: 1. Will you be entitled to claim a deduction under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) for the income year ended 30 June 2015 (2014-15 income year)? | A1: 2. Yes.

Relevant facts and circumstances: 3. This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. 4. You were made redundant by your employer in June 2014. 5. In July 2014 you received your last pay from your former employer which was made up by salary, a redundancy payment and unused annual leave and long service leave. 6. You will receive a superannuation income stream from a complying superannuation fund during the 2014-15 income year. 7. You will receive a superannuation lump sum payment from a complying superannuation fund for the 2014-15 income year. 8. You will generate investment income during the 2014-15 income year. 9. You will be paid a salary or wage for work carried out during the 2014-15 income year which will not exceed 10% of your total assessable income. 10. You intend to make a superannuation contribution to a complying superannuation fund in the 2014-15 income year. 11. You intend to provide the trustee of the complying superannuation fund with a notice of intent to claim a deduction for the contribution to the fund. Contentions 12. For the purposes of subsection 290-160(1) of the ITAA 1997 your last pay in July 2014 from the former employer is not relevant as that pay is not in relation to engaging in employment activities in the 2014-15 income year. 13. For the purposes of subsection 290-160(1) of the ITAA 1997 your superannuation income stream or lump sum from a complying superannuation fund is not relevant as neither are in relation to the holding of an office or appointment of any other activity listed in paragraphs 290-160(1)(a) of the ITAA 1997 for the 2014-15 income year. 14. For the purposes of subsection 290-160(1) of the ITAA 1997 your salary or wage is relevant as it is in relation to employment activities for the 2014-15 income year. 15. As your salary or wage income is expected to be less than 10% of your assessable income for the 2014-15 income year, you are entitled to claim a deduction for personal superannuation contributions. Assumptions 16. You will give the complying superannuation fund a valid notice, in the approved form, of your intention to deduct all or part of your personal contribution before the end of the day on which you lodge your income tax return for the 2014-15 income year or by 30 June 2016 whichever is the earlier. 17. The trustee of the complying superannuation fund will give you an acknowledgement of receipt of the notice before you claim the deduction. 18. You will not have any reportable fringe benefits or reportable employer superannuation contributions for the 2014-15 income year. 19. Your assessable income before deducting all other deductions except a deduction under section 290-150 of the ITAA 1997 will be at least the amount of the deduction claimed for personal superannuation contributions.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 26-55. | 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. | Superannuation Guarantee (Administration) Act 1992 Section 12.

Reasons for decision: Summary: 20. Based upon the information you have provided in your application, you will be entitled to claim a deduction for the 2014-15 income year. 21. However, if your circumstances vary to those set out in your application, your eligibility to claim the deduction may be affected. | Detailed Reasoning - Detailed reasoning: 22. To claim a deduction for personal superannuation contributions (PSC) during an income year, you must make a contribution to a complying superannuation fund or a Retirement Savings Account for the purposes of providing superannuation benefits for yourself in that income year. In addition, all the conditions specified in section 190-150 of the ITAA 1997 must be met. 23. These conditions are: • Where the contribution is made to a superannuation fund, the fund must be a complying superannuation fund in the income year that the contribution is made (section 290-155 of the ITAA 1997); and • You must satisfy the age related conditions (section 290-165 of the ITAA 1997); and • You must have given a valid notice of intent to the superannuation fund or RSA provider in the approved form by the required time and received an acknowledgement from the fund (section 290-170 of the ITAA 1997); and • Where applicable, you must not have exceeded the 'maximum earnings as employee condition' (section 290-160 of the ITAA 1997). 24. Additionally, the maximum amount you are allowed to deduct is limited by section 26-55 of the ITAA 1997. 25. You are going to make a personal contribution to a certain superannuation fund. You wish to claim an income tax deduction for all or part of the contribution. | Detailed Reasoning - Complying fund condition: 26. Section 290-155 of the ITAA 1997 states that if your contribution is made to a superannuation fund, it must be a complying superannuation fund for the income year of the fund in which you made the contribution. 27. Your contribution will be made to a superannuation fund which is a complying superannuation fund. Therefore you meet this condition. | Detailed Reasoning - Age related condition: 28. Section 290-165 of the ITAA 1997 provides that conditions related to age must be met to be able to claim a PSC deduction. One condition relates to persons aged under 18 years of age at the end of the income year. The other condition is that you make the contribution on or before the day that is 28 days after the end of the month in which you turn 75. 29. You will be between 18 and 74 years of age when you make the contribution and consequently you meet this condition. | Detailed Reasoning - Valid notice of intent to deduct condition: 30. Section 290-170 of the ITAA 1997 provides that in order for a contribution, or a part of the contribution, to be deductible you must have given a valid notice to the relevant superannuation fund, in the approved form, of your intention to claim a deduction for all or part of the contribution, before the earlier of the end of the day on which you lodge your income tax return for the income year in which the contribution was made and the end of the next income year. 31. Additionally, the superannuation fund must have given you an acknowledgment of receipt of the notice. They must do this without delay subject to certain conditions. 32. The conditions for validity include that the notice must be in respect of the contribution, not include all or part of an amount covered by a previous notice and the relevant fund must hold the contribution and not have commenced to pay a superannuation income stream based in whole or part on the contribution. 33. You advise that you intend to provide a valid notice of your intention to deduct an amount of a PSC to your superannuation fund and we have assumed that this will be in the approved form and you will do this before the end of the day on which you lodge your income tax return or 30 June 2016 whichever is the earlier. 34. We have also assumed that this notice will be acknowledged by your superannuation fund. 35. Therefore you meet this condition. | Detailed Reasoning - Maximum earnings as employee condition: 36. Section 290-160 of the ITAA 1997 provides that when you have income that is attributable to 'employment' activity, the amount you earn from that activity must be less than 10% of your combined assessable income (disregarding any excess concessional contributions you have for the corresponding financial year), reportable fringe benefits and the total of your reportable employer superannuation contributions for that income year. 37. Income that is attributable to employment activity is derived from engaging in any of the following activities: • holding an office or appointment; • performing functions or duties; • engaging in work; and • doing acts or things and these activities would result in you being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA). 38. Taxation Ruling TR 2010/1 Income tax: superannuation contributions explains some aspects of the rules in Division 290 of the ITAA 1997 that apply if a personal contribution is to be deducted. 39. Paragraph 59 of TR 2010/1 relates to engagement in an employment activity and states: 59. A person will be engaged in an 'employment' activity if they are engaged in an activity in the income year that results in them being treated as an employee for the purposes of the SGAA. The term 'engaged' is not defined and takes its ordinary meaning. One of several meanings given to engaged is 'busy or occupied; involved'. Another meaning is 'under an engagement' where the ordinary meaning of 'engagement' is given as 'under an obligation or agreement'. 40. TR 2010/1 provides examples to assist us to understand how the Commissioner's view has been reached. Example 8 at paragraphs 88 and 89 of TR 2010/1 is relevant to your situation. Paragraphs 88 and 89 state: | Detailed Reasoning - Example 8 - maximum earnings test: 88. Caitlyn terminates her employment with Bling Pty Ltd on 30 June 2009 and was paid unused long service leave and annual leave on 3 July 2009. Caitlyn made a contribution of $5,000 to her complying superannuation fund on 9 July 2009. Caitlyn was not engaged in any employment activities for the 2009-10 income year. 89. As Caitlyn was not engaged in any employment activities on the 2009-10 income year, she does not need to meet the earnings test in relation to her $5,000 contribution. 41. We have assumed you will have no reportable fringe benefits or reportable employer superannuation contributions. 42. You acknowledge that you will receive an amount of income from employment activity. However, you contend that your income from your former employer and superannuation fund (both pension and lump sum) are not income from employment activity in the 2014-15 income year. 43. In your application you advise that you ceased employment with your former employer in June 2014 and you received your final pay from your former employer in July 2014. 44. Based upon the information you have provided, you were not engaged in any employment activities with your former employer during the 2014-15 income year and therefore are not an employee of this organisation for the purposes of the SGAA for the 2014-15 income year. Accordingly, the income you received from your former employer during the 2014-15 income year will not be income that is attributable to an employment activity. 45. Income that is received as a superannuation income stream or a superannuation lump sum is not attributable to an employment activity and therefore will not count towards your maximum earnings as an employee condition. 46. Furthermore, investment income also does not count towards your maximum earnings as an employee condition as this income is not attributable to an employment activity. 47. Based upon the information provided, your income that is attributable to employment activity will be less than 10% of your assessable income in the 2014-15 income year. Therefore you meet this condition. | Detailed Reasoning - Maximum amount you are allowed to deduct: 48. Section 26-55 of the ITAA 1997 limits the total of the amount you can deduct for an income year under certain provisions including section 290-150. The allowable deduction is limited under subsection 26-55(2) to the amount of your assessable income remaining after subtracting all other deductions (excluding previous year's tax losses and any deductions for farm management losses) from your assessable income. Thus a deduction for personal superannuation contributions cannot add to, or create, a loss. 49. We have assumed that after subtracting from your assessable income all your deductions except any PSC deduction you will have at least the amount of your PSC deduction remaining as assessable income. | Detailed Reasoning - Conclusion: 50. You will be eligible to claim a deduction for PSC for the 2014-15 income.