Private ruling: Timing of employer superannuation contributions
Published: April 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Should Fund X include the employer contributions in its assessable income for the relevant income year in accordance with subsection 295-190(1) of the ITAA 1997? | A1: Yes. | Q2: Are the employer contributions deductible under section 290-60 of the Income Tax Assessment Act 1997 (ITAA 1997) during the relevant income year? | A2: Yes, provided that all conditions under section 290-60 of the ITAA 1997 are satisfied.

Relevant facts and circumstances: Employer X is a company. Fund X is a self-managed superannuation fund. At the end of the relevant income year, the employer processed two separate superannuation contributions via internet banking to a linked internet bank account for Fund X. The transfers were at the end of the relevant income year but after the Bank's cut off time. Consequently, the transactions showed up on the bank statement for the fund on the next business day which fell in the subsequent income year. The Bank statement for Employer X shows the withdrawals dated in the subsequent income year. The Bank statement for Fund X shows the contributions dated in the subsequent income year. In an email, the Bank advised that the transfer was conducted during the relevant income year and that the contribution was credited in that year. The Bank's published policy on internet transactions between its own accounts states that if a transfer is made after the cut-off time on a business day, the amount is credited on that day but dated the next business day.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 290-60. | Income Tax Assessment Act 1997 Subsection 290-60(3). | Income Tax Assessment Act 1997 Subsection 290-60(4). | Income Tax Assessment Act 1997 Section 290-70. | Income Tax Assessment Act 1997 Section 290-75. | Income Tax Assessment Act 1997 Section 290-80.

Reasons for decision: Summary: The employer contributions have been made during the relevant income year, therefore the contributions must be included in the fund's assessable income in that income year. Employer X can only claim a deduction for the superannuation contributions made in the relevant income year if all of the conditions under section 290-60 of the ITAA 1997 are satisfied. | Detailed Reasoning - Year of receipt of the contribution: In respect of both the income of a complying superannuation fund and a deduction allowable to a person for their personal superannuation contributions, the relevant year of income is the year in which the contribution is made. Taxation Ruling TR 2010/1 discusses at length the Commissioner of Taxation's view on how and when a contribution is made to a superannuation fund. Paragraph 12 of TR 2010/1 states: A superannuation fund's capital is most commonly increased by transferring funds to the superannuation provider and, as a general rule, the contribution will be made when the funds are received by the superannuation provider. This means that a contribution is taken to have been made to the superannuation fund when the trustee of superannuation fund receives it. In addition, TR 2010/1 continues 186. When a financial institution agrees to accept a payment instruction it notifies the receiving institution of the details of the payment. In Australia there are several different clearing systems for the transferring of information and netting of amounts to be transferred between institutions. The clearing rules of these systems bind the financial institutions but not the customers. Most small payments between institutions are not processed in real time but are subject to deferred net settlement which occurs overnight. As such, it is not until an amount is credited to a bank account of the superannuation provider that a contribution will be taken to be made. 187. A superannuation provider's account statement would normally provide the best evidence as to when a contribution is received. However, in limited circumstances, other evidence may be used to determine when a contribution is made. For example, a transfer of funds between the linked accounts of a member of a self-managed superannuation fund and the fund held at the same financial institution may result in a contemporaneous debit and credit to the respective accounts with the funds being immediately available for use of the self-managed superannuation fund. When such a transfer occurs on a week-end, it is common for bank statements to show the transaction occurring on the next business day. Evidence, such as a computer print-out recording the receipt of the amount into an account of the superannuation provider, may be used to establish the timing of the contribution In this case, the employer processed two separate super contributions via internet banking to a linked internet bank account for the fund at the end of the relevant income year. Due to the bank's cut-off times, the transactions showed up on the bank statement for the fund on the next business day which fell in the subsequent income year. However, a letter from the Bank provided confirmation that although Employer X conducted the two online transfers at the end of the financial year after the cut-off time, the bank still physically processed the two transactions on that date and the monies were in the account on that date. As the timing of contributions is a question of fact, it is considered that the contributions for were made in the relevant income year as the funds were credited in the account by the bank during that year. Accordingly, these contributions must be included in Fund X's assessable income for the relevant income year. | Detailed Reasoning - Deduction for employer superannuation contributions: The operative provisions dealing with the deductibility of contributions to a superannuation fund for the benefit of an employee by an employer are contained in subdivision 290-B of Division 290 of the Income Tax Assessment Act 1997 (ITAA 1997). An entity is entitled to claim a tax deduction in respect of all superannuation contributions under section 290-60 of the ITAA 1997 if: · the contribution is made to a superannuation fund or a retirement savings account (RSA); · the contribution is made for the purpose of providing superannuation benefits for another person who is an employee of the entity when the contribution is made; and · the conditions in sections 290-70, 290-75 and 290-80 of the ITAA 1997 are also satisfied. Further, a deduction cannot be claimed in respect of a contribution if it is an amount paid by the entity, as mentioned in regulations under the Family Law Act 1975 , to a regulated superannuation fund (within the meaning of that Act) or to an RSA, to be held for the benefit of a non-member spouse of the entity in satisfaction of his or her entitlement in respect of the superannuation interest concerned (subsection 290-60(4) of the ITAA 1997). In the present case, a superannuation contribution was conducted by the Employer X to Fund X which is the superannuation fund for one of its employees at the end of the relevant income year. Subsection 290-60(3) of the ITAA 1997 provides that a deduction can only be claimed in respect of the year of income in which the contribution is made. Taxation Ruling TR 2010/1 titled Income Tax: superannuation contributions, which deals with the issue of deductions for contributions to superannuation funds for the benefit of employees, makes the following comment at paragraph 183 as to when a payment is made to a superannuation fund: A contribution of funds as cash or an electronic funds transfer is made when the amount is received by the superannuation provider or credited to the relevant account. The above provides that a person is taken to have made a contribution when the fund receives it. The legislation itself is quite specific. It requires that a contribution be made in the relevant year of income to a superannuation fund and, subject to the necessary requirements being met, a deduction will be allowed for that year of income. Therefore, as the transaction took place at the end of the relevant income year and the funds arrived in the relevant account on that date, it is considered that the contributions were received by Fund X in the relevant income year and hence, a deduction may only be allowed during that income year if all other conditions are satisfied.