Private ruling: Deductibility of personal super contributions
Date of advice: 2 October 2015
Published: November 2015
Ruling period: Income year ended 30 June 2016.
Date scheme commenced: 1 July 2015.

Ruling: Q1: Does the maximum earnings as employee condition under section 290-160 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the taxpayer in the 2015-16 income year? | A1: No.

Relevant facts and circumstances: The Taxpayer was employed by a company. As a result of suffering a medical condition, the Taxpayer ceased working from a date in the 2013-14 income year, before returning to part time work until a date in the 2014-15 income year. The Taxpayer last worked for the company on a date in the 2014-15 income year. They are no longer employed by the company. The Taxpayer is not currently working and has provided information to indicate that they will not be well enough to work in any capacity during the 2015-16 income year. Following the Taxpayer's illness, they began receiving illness benefits from an income protection policy on a date in the 2014-15 income year. These benefits are the Taxpayer's sole source of income for the 2015-16 income year. The Taxpayer is the insured party on the income protection policy. A copy of the latest insurance policy has been provided.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 290-150. | 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: The Taxpayer will not be subject to the maximum earnings test under section 290-160 of the ITAA 1997 in the 2015-16 income year because the Taxpayer will not be engaged in any employment activities during that 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 a 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 out in section 290-160 of the ITAA 1997. 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). 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. [emphasis added] In this case, the Taxpayer has already ceased employment and will not engage in any activities in the 2015-16 income year that would make them an employee for the purposes of the SGAA. Accordingly, the Taxpayer will not be subjected to the maximum earnings test under section 290-160 of the ITAA 1997 in the 2015-16 income year. | Detailed Reasoning - Other conditions: As the Taxpayer will not be required to satisfy section 290-160 of the ITAA 1997, the Taxpayer will be able to claim a deduction for their personal superannuation contributions in the 2015-16 income year if the conditions under sections 290-155, 290-165 and 290-170 of the ITAA 1997 are satisfied. In other words, the Taxpayer will be able to claim a deduction if: • The contribution is made to a complying superannuation fund; • The contribution is made before a certain date (28 days after the end of the month in which the Taxpayer turns 75); and • The Taxpayer lodges a valid notice of intent to deduct with the superannuation fund before the relevant due date and receives acknowledgement of their notice from the superannuation fund.