Private ruling: Contributions to superannuation funds
Date of advice: 1 November 2017
Published: March 2018
Ruling period: Income year ended 30 June 2017 | Income year ending 30 June 2018
Date scheme commenced: 1 July 2016

Ruling: Q1: Does the maximum earnings as employee condition in former section 290-160 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to a person (the Taxpayer) for the purpose of section 290-150 of the ITAA 1997? | A1: No

Relevant facts and circumstances: The Taxpayer was employed by an entity (the Employer). During the course of their employment, the Taxpayer sustained a work related injury which rendered them permanently unable to work. Shortly after, the Taxpayer’s employment was terminated by the Employer. The Taxpayer is in receipt of workers’ compensation payments, and will continue to receive these payments until they reach the age of 65. In the 2016-17 and 2017-18 income years, the Taxpayer made personal superannuation contributions to their superannuation fund (the Fund). In the 2016-17 income year, the Taxpayer gave the trustee of the Fund a valid Notice of intent to claim or vary a deduction for personal super contributions (Notice of Intent) indicating their intention to claim a deduction for contributions made into the Fund in the 2016-17 income year. The trustee of the Fund acknowledged receipt of the Notice of Intent for the 2016-17 income year. In the 2017-18 income year, the Taxpayer gave the trustee of the Fund a valid Notice of Intent to claim a personal contribution deduction in the 2017-18 income year. The trustee of the Fund acknowledged receipt of Notice of Intent for the 2017-18 income year. The Taxpayer has not lodged their income tax return for the 2016-17 income year. The Fund is a complying superannuation fund. The Taxpayer’s is aged more than 18 and less than 75 years.

Relevant legislative provisions: 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 maximum earnings as an employee condition in the former section 290-160 of the ITAA 1997 does not apply to the Taxpayer in the 2016-17 income year because they were not engaged in any employment activities in that income year. The maximum earnings as an employee condition in the former section 290-160 of the ITAA 1997 does not apply to the Taxpayer in the 2017-18 income year because that section was repealed effective 1 January 2017 and does not apply to superannuation contributions made in the 2017-18 income year and later years. | Detailed Reasoning - Deducting personal contribution: 2016-17 income year: Section 290-150 of the ITAA 1997 provides that an individual may deduct a personal superannuation contribution made to a superannuation fund for the purpose of providing superannuation benefits for themselves (or their dependants after death). However, subsection 290-150(2) of the ITAA 1997 states that all conditions in section 290-155, 290-160 (if applicable), 290-165 and 290-170 of the ITAA 1997 must also be satisfied for an individual to deduct a contribution made in that income year. Relevantly, former section 290-160 of the ITAA 1997 applies if: (a) In the income year in which you make the contributions, 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 has not been enacted). The employment activity condition in section 290-160(1) of the ITAA 1997 is discussed in Taxation Ruling TR 2010/1 Income Tax: superannuation contributions (TR 2010/1) where, at paragraphs 57 and 58, 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. It is clear from the facts that the Taxpayer has not been engaged in any employment activities for the purposes of former section 290-160 of the ITAA 1997 following their workplace injury. Thus, former section 290-160 does not apply to the Taxpayer in the 2016-17 income year. | Detailed Reasoning - Deducting personal contribution: 2017-18 income year: Former section 290-160 of the ITAA 1997 was repealed effective 1 January 2017 and does not apply to superannuation contributions made in the 2017-18 income year and later income years. Therefore, it is no longer a necessary condition for claiming a deduction for a personal superannuation contribution. As former section 290-160 of the ITAA 1997 does not apply to the Taxpayer in 2016-17 income year and the 2017-18 income year, and they have satisfied all the other conditions in sections 290-155, 290-165 and 290-170 of the ITAA 1997, the Taxpayer is entitled to claim a deduction for personal superannuation contributions made to the Fund in the 2016-17 and 2017-18 income years.