Private ruling: Deductibility of personal superannuation contributions
Date of advice: 28 August 2015
Published: August 2015
Ruling period: Income year ended 30 June 2015.
Date scheme commenced: 1 July 2014.

Ruling: Q1: Has the taxpayer satisfied the maximum earnings condition for the purposes of section 290-160 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

Relevant facts and circumstances: The Taxpayer is less than 55 years of age. The Taxpayer made personal superannuation contributions to a complying superannuation fund. During the 2014-15 income year, the Taxpayer received income from a number of non-employment related sources, including as follows: • Partnership income • Rental receipts • Interest income • Pension income The Taxpayer also received income from employment-related sources during the 2014-15 income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 290-150. | Income Tax Assessment Act 1997 Subsection 290-150(2) | 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 Subsection 290-160(2). | Superannuation Guarantee (Administration) Act 1992 Subsection 6(1).

Reasons for decision: Summary: Based on the information provided, the Taxpayer meets the maximum earnings condition for the 2014-15 income year. Provided that the other requirements as referred to in subsection 290-150(2) of the ITAA 1997 are satisfied the Taxpayer can claim a deduction for personal super contributions made in the 2014-15 income year. | Detailed Reasoning - Detailed reasoning: In accordance with section 290-150 of the ITAA 1997, a person who makes contributions to a superannuation fund for the purpose of providing superannuation benefits for themselves, can claim the deduction for contributions in the income year the contributions are made. However, to deduct the contributions, the person must satisfy a number of conditions, including the maximum earnings as employee condition set in section 290-160. Subsection 290-160(1) of the ITAA 1997 applies the maximum earnings as an employee condition 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) of the ITAA 1997): • 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). For those persons who are engaged in any 'employment' activities, subsection 290-160(2) of the ITAA 1997 prescribes that a deduction for personal contributions can only be claimed where the sum of their: • assessable income; • reportable fringe benefits total; and • reportable employer superannuation contributions; attributable to the 'employment' activities is less than 10% of the total of that 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. 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 paragraphs 57 and 58 of TR 2010/1 the Commissioner states: 57. Those persons who are engaged in an 'employment' activity in the income year in which they make a contribution need to meet an earnings test if they are to deduct their contribution. 58. 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 workers' compensation payments are not employed at any time during the year, are not subject to the maximum earnings test. Furthermore, the Commissioner has given examples of where a person will be engaged in an 'employment' activity without being physically engaged in the activity. At paragraph 60 of TR 2010/1 the Commissioner states: 60. Consequently, a person need not be physically engaged in the activity. For example: • a common law employee or office holder will be engaged in the activity while they remain employed or hold the office; Therefore a person is engaged in an employment activity while they remain employed or hold the office and receive a payment in relation to that employment. In this case, the Taxpayer received income from a number of non-employment related sources, as follows: • Partnership income • Rental receipts • Interest income • Pension The Taxpayer also received income from employment-related sources during the 2014-15 income year. The Taxpayer's total income, from both employment and non-employment related sources, totals a certain figure. The percentage of the Taxpayer's total income to be classified as employment-related is less than 10%. Based on the above, the Taxpayer has met the maximum earnings condition for the 2014-15 year.