Private ruling: Deduction for Personal Superannuation Contributions
Ruling period: Year ending 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Can your client claim a deduction for a personal superannuation contribution to be made in the 2010-11 income year under section 290-150 of the Income Tax Assessment Act 1997 of the ITAA 1997? | A1: 

Relevant facts and circumstances: Your client operates in private practice, and has not been employed in any capacity during the 2010-11 income year. At all times during the 2010-11 income year your client will be under age 75. Your client is a member of a constitutionally protected state administered superannuation fund (the Fund). The Fund is also an exempt public sector superannuation scheme and a complying superannuation fund. You understand that under the rules which govern the Fund, your client is able to make personal superannuation contributions to the Fund. In this light, your client intends to make a personal contribution to the Fund in the 2010-11 income year. Your client will provide a written notice of intent to deduct contributions to the fund trustee, stating that they intend to claim a deduction for this contribution. Your client will receive a notice for the 2010-11 income year from the fund trustee, acknowledging receipt of your client's notice of intent in respect of this contribution. You have advised that a deduction for the proposed contribution will not add to or create a loss for your client in the 2010-11 income year. Assumptions Your client will not be engaged in any activities during the 2010-11 income year that would result in them being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 .

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 Subsection 290-160 (1) | Income Tax Assessment Act 1997 Paragraph 290-160 (1) (a) | Income Tax Assessment Act 1997 Paragraph 290-160 (1) (b) | Income Tax Assessment Act 1997 Subsection 290-160 (2) | Income Tax Assessment Act 1997 Subsection 290-165 (2) | Income Tax Assessment Act 1997 Section 290-170 | Income Tax Assessment Act 1997 Section 290-175 | Income Tax Assessment Act 1997 Subsection 995-1 (1) | Income Tax Assessment Regulations 1997 Regulation 995-1.04 Summary of decision | On the assumption that your client will not be engaged in any activities during the 2010-11 income year that would result in your client being treated as an employee for Superannuation Guarantee purposes, the maximum earnings as an employee condition not does apply to your client in this income year. | Consequently, your client can claim a deduction for the personal contribution they will make in this income year, as all the conditions for claiming a deduction will be satisfied. | Detailed reasoning | Personal superannuation contributions made in the 2010-11 income year | From 1 July 2007, 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. These conditions are explained in detail in Taxation Ruling TR 2010/1 (TR 2010/1) entitled 'Income Tax: superannuation contributions' . | 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 you made the contribution. | In this case, your client proposes to make a personal contribution to a state administered superannuation fund (the Fund). The Fund is an exempt public sector superannuation scheme, and is a complying superannuation fund. Therefore, your client will satisfy this condition. | Maximum earnings as an employee condition | For those persons who are engaged in any 'employment' activities in the 2010-11 income year, a deduction can only be claimed where the sum of assessable income, reportable fringe benefits total, and reportable employer superannuation contributions attributable to the 'employment' activities is less than 10% of the total of the person's assessable income, reportable fringe benefits total and reportable employer superannuation contributions. The term 'reportable employer superannuation contributions includes salary sacrifice contributions made for the person's benefit in that income year. | Subsection 290-160 (1) of the ITAA 1997 operates to apply the maximum earnings test only if, in the income year in which the contribution is made, the person is engaged in any of the following activities (paragraph 290-160 (1) (a)): | · holding an office or appointment (for example, a director of a company); | · performing functions or duties; | · engaging in work; | · doing 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). The maximum earnings as an employee condition does not apply to your client | 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, and | · as a result be treated as an employee for the purposes of the SGAA. | Your client operates in private practice. You have advised that your client has not been employed in any capacity during the 2010-11 income year. | It is assumed that your client will not hold an office, or perform any work or be engaged in any activities during this income year that would result in him being treated as an employee for the purposes of the SGAA. In this respect, you have advised that this assumption has been the case up until now, and that this assumption will not change for the remainder of the income year. | Based on this assumption, 'the maximum earnings as an employee' condition does not apply to your client in the 2010-11 income year. Consequently, section 290-160 of the ITAA 1997 does not apply to your client in this income year. | 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. As your client will be under age 75 at the time they intend to make the proposed contribution to the Fund during the 2010-11 income year, your client will satisfy the age-related conditions. | Notice of intent to deduct conditions | Section 290-170 of the ITAA 1997 provides that your client must give to the trustee of the complying superannuation fund (the fund trustee) a valid notice, in the approved form, of their intention to claim a deduction in respect of the contribution, and they must also have been given an acknowledgment, of receipt of the notice by the fund trustee. | Section 290-170 of the ITAA 1997 also provides that your client must give their notice to the fund trustee by the earlier of the date they lodge their income tax return or the end of the income year following the year in which the contribution was made. In addition, the trustee is required to acknowledge your client's notice without delay. | · A notice will be valid as long as the following conditions are satisfied: | · the notice is in respect of the contribution; | · the notice is not for an amount covered by a previous notice; | o at the time when the notice is given: | o your client is a member of the fund; | o the fund trustee holds the contribution (for example, a notice will not be valid if a partial roll-over of the superannuation benefit which includes the contribution covered in the notice has been made); | o the fund trustee has not begun to pay a superannuation income stream based on the contribution; or | · before the notice is given: | o a contributions splitting application has not been made in relation to the contribution; and; | o the fund trustee has not rejected the application. | You have advised that your client will provide a valid notice of their intention to claim a deduction to the fund trustee in respect of the proposed contribution. You have also advised that your client will receive a written notice from the trustee acknowledging receipt of their notice of intent for the contribution. You assert that your client will meet the requirements of section 290-170 of ITAA 1997 once they have taken this action. | Provided your client lodges a valid notice of intent with the fund trustee before they lodge their income tax return for the 2010-11 income year or by 30 June 2012, whichever is the earlier, and the trustee duly acknowledges their notice, the notice of intent to deduct conditions under section 290-170 of the ITAA 1997 will be satisfied. | Deduction limited by amount specified in notice | Subsection 290-175 of the ITAA 1997 states, that, the deduction cannot be more than the amount covered by the notice given under section 290-170 of the ITAA 1997. | Provided the amount of the deduction your client will claim does exceed the amount specified in their section 290-170 notice, your client will also satisfy this requirement. | Deduction limits | From 1 July 2007, the previous age-based limits on deductions for personal superannuation contributions have been abolished. As a result a person can now claim a full deduction for the amount of the superannuation contribution made. | However, 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 years 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. | You have advised that the deduction for the proposed contribution will not add to or create a loss in the 2010-11 income year. Therefore it is accepted that the deduction will not create a loss in this income year. | Conclusion | As your client will satisfy all the required conditions in subdivision 290-C of the ITAA 1997, your client can claim a deduction in the 2010-11 income year for the entire personal contribution he intends to make to the Fund in this income year. | However, it is noted that the Fund is a constitutionally protected fund. Therefore, the proposed contribution will not be a concessional contribution in the 2010-11 financial year, and will not be counted towards your client's annual concessional contributions cap of $25,000 for this financial year. Rather, the proposed contribution will be a non-concessional contribution, and it will be counted towards his non-concessional contributions cap for the financial year in which the contribution is made to the Fund.


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