Private ruling: Deductibility of personal superannuation contributions
Published: April 2014
Ruling period: 2013-14 income year
Date scheme commenced: 1 July 2013.

Ruling: Q1: Can your client claim a deduction for a personal superannuation contribution to be made in the 2013-14 income year under section 290-150 of the Income Tax Assessment Act 1997? | A1: Yes.

Relevant facts and circumstances: Your client is under 75 years of age. You state that your client satisfies the criteria as an eligible person to claim a deduction for personal superannuation contributions. Your client is a member of the Fund, a constitutionally protected fund (CPF). The Fund has advised they are willing to accept personal contributions from your client. Your client intends to make a personal tax deductible contribution to the Fund in the 2013-14 financial year. The contribution amount will be approximately $[amount]. The amount of the deduction your client intends to claim in respect of personal contributions will not add to or create a loss in each income year. Your client will provide written notice of intent to deduct contributions to the trustee of the Fund in each relevant year. Your client will receive written notice for the 2013-14 income year from the trustee of the Fund to acknowledge receipt of his notice of intent to deduct contributions. You have advised your client will not be engaged in activities during the period 1 July 2013 to 30 June 2014 that would result in him being treated as an employee for the purpose of the Superannuation Guarantee (Administration) Act 1992 .

Relevant legislative provisions: Income Tax Assessment Act 1997 Paragraph 26-55(1)(d). | 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 292-15. | Income Tax Assessment Act 1997 Section 292-20. | Income Tax Assessment Act 1997 Subsection 292-20(2). | Income Tax Assessment Act 1997 Section 292-25. | Income Tax Assessment Act 1997 Paragraph 292-25(2)(c). | Income Tax Assessment Act 1997 Section 292-80. | Income Tax Assessment Act 1997 Section 292-85. | Income Tax Assessment Act 1997 Subsection 292-85(2). | Income Tax Assessment Act 1997 Section 292-90. | Income Tax Assessment Act 1997 Paragraph 292-90(2)(c).

Reasons for decision: Summary: Your client can claim a deduction for personal contributions to a constitutionally protected fund as he/she meets all the requirements of subdivision 290C of the ITAA 1997. Your client's personal deductible contributions will not be included as concessional contributions and therefore will not be counted towards his/her concessional contributions for the 2013-14 income year. However, any personal contributions your client makes to the constitutionally protected fund which are not deductible will be counted towards your client's non-concessional contributions for the 2013-14 income years. | Detailed Reasoning - Limits on concessional contributions: Concessional contributions include employer contributions (including contributions made under a salary sacrifice arrangement) and personal contributions claimed as a tax deduction by a self-employed person. Concessional contributions made to superannuation funds are subject to an annual cap of $25,000. The concessional contributions cap will be indexed to upward movements of average weekly ordinary time earnings (AWOTE) in $5,000 increments (subsection 292-20(2) of the Income Tax Assessment Act 1997 (ITAA 1997)). A person will be taxed on concessional contributions over the $25,000 cap at a rate of 31.5%. The superannuation fund can be asked to release money to pay this excess contributions tax. Amounts in excess of the concessional contributions cap are counted towards the non-concessional contributions cap. | Detailed Reasoning - Amounts excluded from being concessional contributions: Under paragraph 292-25(2)(c) of the ITAA 1997 the following amounts are excluded from being concessional contributions: i. so much of an amount that is transferred to a superannuation fund from a foreign superannuation fund and is included in the assessable income of the fund as a result of a choice made under section 305-80; ii. an amount that is a roll-over superannuation benefit to the extent that it contains an untaxed element that is not an excess untaxed roll-over amount; | Detailed Reasoning - iii. a contribution made to a constitutionally protected fund (CPF).: You have advised that your client will be making personal superannuation contributions to GESB West State Super (the Fund) and intend to claim a tax deduction in respect of those contributions. The requirements to be met in order to claim a deduction in respect of personal superannuation contributions are as follows: 1. The contribution is made to a complying superannuation fund. 2. If the person is engaged in any of the following activities in the income year in which the contribution is made: • Holding an office or appointment (for example, a director of a company); • Performing functions or duties; • Engaging in work; • Do acts or things; and the activities result in that person being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA), then the total of that person's assessable income and reportable fringe benefits attributable to the activities must be less than 10% of their total assessable income and reportable fringe benefits for the income year. 3. The contribution must be made on or before 28 days after the end of the month in which the person turned age 75. 4. The person must provide a valid notice to the trustee of the relevant superannuation fund and the trustee acknowledges that notice. Where you satisfy these conditions you will be entitled to claim a deduction for your personal superannuation contributions. However, under paragraph 26-55(1)(d) of the ITAA 1997, the deduction you claim cannot add to or create a loss. In this case you have advised that your client will provide written notice of intent to deduct contributions to the trustee of the Fund, that he will not be engaged in activities during each income year that would result in him being treated as an employee for the purposes of the SGAA, and that the amount will not add to or create a loss. As the above conditions are satisfied, these contributions will not be included as concessional contributions, by virtue of subparagraph 292-25(2)(c)(iii) of the ITAA 1997, and will not be counted towards his concessional contributions for the 2013-14 income year. | Detailed Reasoning - Non-concessional contributions: Non-concessional contributions include: • personal contributions for which an income tax deduction is not claimed; • contributions a person's spouse makes to their superannuation fund account; and • transfers from foreign superannuation funds (excluding amounts included in the fund's assessable income). Non-concessional contributions made to superannuation funds are subject to an annual cap of $150,000. The non-concessional contributions cap is a multiple of the concessional contributions cap ($25,000) and will increase as the concessional cap moves with indexation (subsection 292-85(2) of the ITAA 1997). Contributions in excess of the non-concessional contributions cap will be taxed at the rate of 46.5%. The member will be required to ask their superannuation fund to release an amount that is equal to the tax liability. Some contributions are specifically excluded from being non-concessional contributions (paragraph 292-90(2)(c) of the ITAA 1997). These are: i. a Government co-contribution; ii. a contribution arising from a structured settlement or an order for personal injury (section 292-95); iii. a contribution relating to some capital gains tax (CGT) small business concessions to the extent that it does not exceed the CGT cap amount ($1,315,000 for the 2013-14 income year) when it is made (section 292-100); | Detailed Reasoning - iv. a contribution made to a CPF other than a personal contribution for which an income tax deduction is not claimed;: v. contributions not included in the assessable income of the superannuation fund because of a choice made under section 295-180; and vi. a contribution that is a roll-over superannuation benefit. You have advised that your client will be making personal superannuation contributions to the Fund and intend to claim a tax deduction in respect of those contributions. Provided your client satisfies the conditions listed earlier your client will be entitled to claim a deduction for his personal superannuation contributions. These contributions, to the extent that they are claimed as a tax deduction, will not be included as non-concessional contributions, by virtue of subparagraph 292-90(2)(c)(iv) of the ITAA 1997, and will not be counted towards your client's non-concessional contributions for the 2013-14 income year. However, any personal contributions for which your client does not claim a tax deduction will be non-concessional contributions and will be counted towards his non-concessional contributions for the 2013-14 income year.