Private ruling: Personal deductible contributions
Date of advice: 9 May 2016
Published: June 2016
Ruling period: Year ending 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you eligible to claim a deduction under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) for personal superannuation contributions made in the relevant income year? | A1: Yes

Relevant facts and circumstances: On 30 June 20XX you terminated employment with your former employer (the Former Employer). In July 20XX, you received an employment termination payment from the Former Employer. You have advised that during the subsequent income year, you have not and will not be engaged in any of the following activities: • holding an office or appointment; • performing functions or duties; • engaging in work; • doing acts or things that would result in you being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 SGAA. You are a member of a complying superannuation fund (the Fund). You intend to make a personal superannuation contribution into the Fund in the subsequent income year. You will be 6X years old as at 30 June 20YY. Assumption You will give to the trustee of the Fund a valid notice, in the approved form, that you intend to claim the deduction. The trustee of the Fund will give you an acknowledgment of receipt of the notice.

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 290-155 | Income Tax Assessment Act 1997 Section 290-160 | Income Tax Assessment Act 1997 Subsection 290-160(1) | Income Tax Assessment Act 1997 Section 290-165 | Income Tax Assessment Act 1997 Section 290-170 All references are to the ITAA 1997 unless otherwise indicated.

Reasons for decision: Summary: You can deduct personal superannuation contributions you intend to make in the subsequent income year. You will not be subject to the maximum earnings as employee test in the subsequent income year because you will not be engaged in any employment activities during the subsequent income year that would result in you being treated as an employee for the purposes of the SGAA. | Detailed Reasoning - Personal superannuation contributions made in the 2015-16 income year: An individual 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, provided certain conditions are met. Subsection 290-150(2) 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 the contributions made in that income year. | Detailed Reasoning - Complying superannuation fund condition: The condition in section 290-155 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 contribution is made. In this case, you intend to make personal superannuation contributions to a complying superannuation fund therefore, the requirements of section 290-155 will be satisfied. | Detailed Reasoning - Maximum earnings as employee condition: Subsection 290-160(1) 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). The operation of the maximum earnings test is discussed in Taxation Ruling TR 2010/1 Income tax: superannuation contributions (TR 2010/1) . Relevantly, paragraphs 58 and 59 state that: 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] 59. A person will be engaged in an 'employment' activity if they are engaged in an activity in the income year that results in them being treated as an employee for the purposes of the SGAA. The term 'engaged' is not defined and takes its ordinary meaning. One of several meanings given to engaged is 'busy or occupied; involved'. Another meaning is 'under an engagement' where the ordinary meaning of 'engagement' is given as 'under an obligation or agreement.' As reiterated in paragraph 58 of TR 2010/1, where a person is not engaged in an 'employment' activity at any time during the year, they are not subject to the maximum earnings test. Although you received a termination payment from the Former Employer in the subsequent income year, your employment with the Former Employer was, in fact, terminated in the relevant income year and not in the subsequent income year. You have also advised that you have not engaged, and you do not intend to be engaged, in any employment activities in the subsequent income year that would result in you being treated as an employee for the purposes of the SGAA. Accordingly, you will not be subject to the maximum earnings as employee condition under section 290-160. | Detailed Reasoning - Age related condition: As you will be 6X years as at 30 June 20YY, the age-related requirement of section 290-165 will be satisfied. | Detailed Reasoning - Notice of intent to deduct conditions: Whilst you will not be subject to the maximum earning test under section 290-160, and will satisfy the age-related requirement of section 290-165, the conditions in section 290-170 must also be satisfied for you to claim a deduction in the subsequent income year. In accordance with section 290-170, to deduct the contribution you must give to the trustee of the fund a 'valid notice' (in the approved form) of your intention to claim the deduction, and the trustee must have given you an acknowledgment of receipt of the said notice.