Private ruling: Deductibility of personal superannuation contributions
Date of advice: 7 July 2015
Published: July 2015
Ruling period: Income year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the taxpayer be able to claim a tax deduction for their personal superannuation contribution in the relevant income year? | A1: Yes

Relevant facts and circumstances: The taxpayer is a member of a complying superannuation fund (the Fund). The Fund is a constitutionally protected fund (CPF). The taxpayer is a practitioner and receives business income from their practice. The taxpayer was not employed in any capacity during the relevant income year. During the relevant income year, the taxpayer made a personal superannuation contribution to the Fund. The taxpayer has stated that they will provide a written notice to the trustee of the Fund of their intention to claim a deduction. The personal superannuation contribution has not added to or created a loss for the taxpayer. The taxpayer was under over 65 years of age during the relevant income year.

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 Subsection 290-160(2) | Income Tax Assessment Act 1997 Section 290-165 | Income Tax Assessment Act 1997 Subsection 290-165(2) | Income Tax Assessment Act 1997 Section 290-170 | Income Tax Assessment Act 1997 Subsection 290-170(2) | Income Tax Assessment Act 1997 Subparagraph 291-25(2)(c)(iii) | Income Tax Assessment Act 1997 Subparagraph 291-25(2)(c)(iv) | Income Tax Assessment Act 1997 Subsection 307-220(1) | Income Tax Assessment Act 1997 Subsection 307-220(2)

Reasons for decision: Summary: Based on the information, the taxpayer will be able to claim a deduction for their personal superannuation contribution in the relevant income year, provided that all the conditions are satisfied. | Detailed Reasoning - Personal deductible superannuation contributions: 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 ITAA 1997. However, the conditions in sections 290-155, 290-160 (if applicable), 290-165 and 290-170 of the ITAA 1997 must also be satisfied for the person to claim the deduction. | Detailed Reasoning - Maximum earnings as an employee condition: Subsection 290-160(1) of the ITAA 1997 states: This section applies if: (a) in the income year in which you make the contribution, you engage in any of these activities: (i) holding an office or appointment; (ii) performing functions or duties; (iii) engaging in work; (iv) doing acts or things; and (b) the activities result in you being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (assuming that subsection 12(11) of that Act had not been enacted). For those persons who fall under the requirements outlined above, 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. This calculation is referred to as the maximum earnings test. The facts provided in this case indicate that the taxpayer has not engaged in any activities in the relevant income year that would make them an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 . Accordingly, the taxpayer will not be subject to the maximum earnings test under section 290-160 of the ITAA 1997 in the relevant income year. | 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, that fund must be a complying superannuation fund for the income year in which the contribution is made. In this instance, as the Fund is a complying superannuation fund, the condition in section 290-155 of the ITAA 1997 is satisfied for the relevant income year. | Detailed Reasoning - Age-related conditions: Relevantly, 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 the taxpayer was under 75 years of age when the contribution was made, the age-related condition for the contribution in the relevantincome year is satisfied. | Detailed Reasoning - Notice of intent to deduct conditions: According to section 290-170 of the ITAA 1997, in order to deduct a contribution, the taxpayer is required to provide to the trustee of the Fund a valid notice, in the approved form, of their intention to claim a deduction. The notice must be given by the earlier of: (a) the date the taxpayer lodges their income tax return for the income year in which the contribution is made; or (b) the end of the following income year. The taxpayer must also be given an acknowledgment of receipt of the notice by the trustee of the Fund. A notice of intent to deduct for the taxpayer's contributions will not be valid if one or more of the following conditions in subsection 290-170(2) of the ITAA 1997 are satisfied: (a) the notice is not in respect of the contribution; (b) the notice includes all or 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... in relation to the contribution; and (ii) the trustee or RSA provider had not rejected the application. In relation to the contribution in the relevant income year, provided that the taxpayer: (a) gives a valid notice of intent to the trustee of the Fund within the time frames previously discussed; and (b) the trustee of the Fund duly acknowledge the notice; it is accepted that section 290-170 of the ITAA 1997 will be satisfied. As the taxpayer has already satisfied the conditions under sections 290-155 and 290-165 of the ITAA 1997, and is not required to satisfy the condition under 290-160 of the ITAA 1997, satisfying the condition under section 290-170 of the ITAA 1997 will allow the taxpayer to claim a deduction for the personal superannuation contribution in the relevantincome year. | 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. Thus a deduction for personal superannuation contributions cannot add to, or create, a loss. According to the facts of this case, the deduction claimed by the taxpayer in relation to the contribution will not add to or create a loss in the relevant income 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 the taxpayer's concessional contributions cap or non-concessional contributions cap for the relevant income year.