Private ruling: Deduction for personal superannuation contribution
Published: June 2013
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to claim a deduction for a personal superannuation contribution made in the 2013-14 income year? | A1: Yes.

Relevant facts and circumstances: You are currently under 65 years of age. You ceased full time employment during the 2012-13 income year. You stated that you have retired from employment. You intend to make a personal contribution (proposed contribution) to your fund which is a complying Australian Superannuation Fund in the 2013-14 income year. You stated that your income for the year ended 30 June 2014 will comprise of income from a pension scheme and bank interest. You stated that you intend to lodge a Notice of Intent to claim a tax deduction for personal super contributions with the trustee of your fund prior to lodging your 2014 income tax return and expect to receive acknowledgement of the notice from that trustee.

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.

Reasons for decision: Summary: Provided that you satisfy the conditions in sections 290-155, 290-165 and 290-170 of the ITAA 1997 and not required to satisfy section 290-160, you will be entitled to claim a deduction for the proposed contribution which you intend to make in the 2013-14 income year, provided the deduction does not add to or create a tax loss in that income year. | Detailed Reasoning - Detailed reasoning: Deductions for personal superannuation contributions A person must satisfy the conditions in section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) before they can claim a deduction in respect of personal contributions made for the purpose of providing superannuation benefits for themselves, or their dependants after their death. Further, subsection 290-150(2) of the ITAA 1997 provides that the conditions in sections 290-155, 290-160 (if applicable), 290-165 and 290-170 must all be satisfied before the person can claim a deduction for any personal superannuation contributions made in that income year. These conditions are explained in detail in Taxation Ruling TR 2010/1 (TR 2010/1) titled '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, you intend to make a concessional contribution in the 2013-14 income year to a complying superannuation fund. Therefore the complying superannuation fund condition is satisfied. Maximum earnings as an employee condition Section 290-160 of the ITAA 1997 states: (1) 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). (2) To deduct the contribution, less than 10% of the total of the following must be attributable to the activities: (a) your assessable income for the year; (b) your reportable fringe benefits total for the income year. Where a person is engaged in activities during the income year that would make them an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA) then they will need to satisfy the maximum earnings test in order to claim a deduction for their personal superannuation contributions. It should be noted that the level of superannuation support by an employer or another person is no longer a relevant factor under this condition. The Commissioner has issued Taxation Ruling TR 2010/1 which deals with, among other matters, deductions for personal superannuation contributions. At 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. In this case, you indicated that you will not be engaged in any activities during the 2013-14 income year that would make you an employee for the purposes of the SGAA. Therefore, you are not required to meet the conditions of the maximum earnings test. Hence, section 290-160 of the ITAA 1997 does not apply in the income year in which you propose to make a personal superannuation contribution. 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 you will be under 65 years of age when the proposed contribution will be made, you will satisfy the age-related conditions. Notice of intent to deduct conditions Section 290-170 of the ITAA 1997 states in part: To deduct the contribution, or a part of the contribution: (a) you must give to the trustee of the fund or the *RSA provider a valid notice, in the approved form, of your intention to claim the deduction; and (b) the notice must be given before: (i) if you have lodged your income tax return for the income year in which the contribution was made on a day before the end of the next income year - the end of that day; or (ii) otherwise - the end of the next income year; and (c) the trustee or provider must have given you an acknowledgment of receipt of the notice. The notice is not valid if at least one of these conditions is satisfied: (a) the notice is not in respect of the contribution; (b) the notice includes all or a part of an amount covered by a previous notice; In addition, you must also have been given an acknowledgement of the notice by the trustee of the superannuation fund. In this case, you stated that you intend to provide the trustee of the fund with a written notice stating your intention to claim a superannuation deduction for the proposed personal superannuation contribution which you intend to make in the 2013-14 income year. You fully expect that the trustee will acknowledge receipt of your notice. Provided this occurs then the notice of intent to deduct conditions under section 290-170 of the ITAA 1997 will be satisfied. Deduction limits Generally, a person can claim a full deduction for the amount of the 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 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. Contribution limits Concessional contributions made to superannuation funds are subject to an annual cap. Concessional contributions include employer contributions (including contributions made under a salary sacrifice arrangement) and personal contributions claimed as a tax deduction by a person. Please note that for contributions made during the 2013-14 income year, the concessional contributions cap is $25,000. Conclusion Provided that you the conditions in sections 290-155, 290-165 and 290-170 of the ITAA 1997 and as you are not required to satisfy section 290-160, you will be entitled to claim a deduction for the proposed personal superannuation contribution which you intend to make in the 2013-14 income year, provided the deduction does not add to or create a tax loss in that income year.