Private ruling: Deductibility of personal superannuation contributions
Date of advice: 16 August 2016
Published: September 2016
Ruling period: Income year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Can the Taxpayer claim a deduction for personal superannuation contributions made to a complying superannuation fund under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: The Taxpayer is under age 75. The Taxpayer entered into an agreement (the Agreement) to provide services to a company (the Company). The Agreement, wherein the Taxpayer was referred to as the Supplier, commenced in the 2012-13 income year for a fixed period. The Agreement stated amongst other clauses that: (a) the Supplier must ensure: ● goods and services are performed or provided by appropriately qualified and trained personnel, and performed or provided with due care, skill and diligence in a professional, ethical and safe manner by the Supplier and its personnel ● the Company has the benefit of all warranties and undertakings given by manufacturers or the Supplier’s sub-contractors with respect to the goods and services ● if the Company is not satisfied that any goods and/or services will not comply in all respects with the Agreement, the Supplier agrees to take steps as are necessary to ensure compliance with the Agreement. (b) the Company has the right to withhold any payment under the Agreement until such time as the good’s and/or services comply with the Agreement. (c) the Supplier may not assign the rights and/or obligations, or subcontract or delegate its obligations, under the Agreement without the Company’s prior written consent. (d) the Supplier must notify the Company in writing of the identify of all sub-contractors whom the Supplier proposes to engage in connection with the Agreement. The Taxpayer did not work to fixed designated hours or at a fixed location and was typically required to be on site between standard hours, and was remunerated at a fixed hourly rate. The Taxpayer was able to advise on the sequence, priority and order of jobs/tasks but was required to work within certain specifications. The Taxpayer, who has an ABN, received payment from the Company by submitting invoices, wherein GST was included, upon the delivery of goods and/or completion of services. Quarterly business activity statements were completed by the Taxpayer. Under the Agreement the Taxpayer is required to maintain insurances at their own expense. The Taxpayer was not required to wear a uniform and was not provided logo bearing belongings to be used while working. Upon completion of the work under the Agreement period, the Taxpayer would be free to pursue other work, with other parties, through the provision of their skills. The Taxpayer provided their assessable income for the 2013-14 income year and the income received from the Company. In the 2013-14 income year the Taxpayer made personal superannuation contributions to a complying superannuation fund. Documentation from the Fund shows that the contributions made by the Taxpayer were treated as concessional contributions and that the Taxpayer intended to claim a deduction for those contributions. The Company did not consider the Taxpayer to be an employee and did not make any superannuation contributions on their behalf. Assumption On the basis of the information provided, the trustee of the Fund has provided acknowledgment of receipt of the written notice.

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 Section 290-165 | Income Tax Assessment Act 1997 Section 290-170

Reasons for decision: Summary: The Taxpayer can deduct the personal superannuation contributions made to the Fund in the 2013-14 income year. | Detailed Reasoning - Detailed reasoning: 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 - 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 the person made the contribution. The Fund in this case is a complying superannuation fund therefore, this condition is satisfied. | Detailed Reasoning - Maximum earnings as employee condition – 10% test: Subsection 290-160(1) of the ITAA 1997 operates to apply 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)): ● 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’. Where a person is engaged in activities during the income year that would make them an employee for the purposes of the SGAA then they will need to satisfy the maximum earnings test in order to claim a deduction for their personal superannuation contributions. In this case it is considered that based on the facts provided the Taxpayer was not overall providing employment related activities. Accordingly, the Taxpayer is not subject to the maximum earnings test under section 290-160 of the ITAA 1997. | Detailed Reasoning - 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 the Taxpayer was under 75 years of age at all times in relation to the relevant income year, this condition is satisfied. | Detailed Reasoning - Notice of intent to deduct conditions: Section 290-170 of the ITAA 1997 requires a person to provide a valid notice of their intention to claim the deduction to the trustee of their superannuation fund. The notice must be given before the earlier of: ● the date the person lodges their income tax return for the income year in which the contribution was made; or ● the end of the income year following the year in which the contribution was made. In addition, the person must also have been given an acknowledgement of the notice by the trustee of the relevant superannuation fund. A notice will be valid as long as the following conditions apply: ● the notice is in respect of the contributions; ● the notice is not for an amount covered by a previous notice; ● at the time when the notice is given: ○ the person is a member of the fund; or ○ the trustee of the fund 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); or ○ the trustee of the fund has not begun to pay a superannuation income stream based on the contribution; ● before the notice is given: ○ a contributions splitting application has not been made in relation to the contribution; and ○ the trustee of the fund has not rejected the application. On the basis of the information provided the above conditions have been satisfied. | 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. Therefore the deduction for personal superannuation contributions cannot add to or create a loss for the Taxpayer in the 2013-14 income year.