Private ruling: Deduction for personal superannuation contributions
Published: October 2012
Ruling period: Year ended 30 June 2013.
Date scheme commenced: 1 July 2012.

Ruling: Q1: 1. Are you entitled to claim a deduction in respect of personal superannuation contributions for the 2012-13 income year? 2. Are you permitted to enter into an effective salary sacrifice arrangement with your foreign employer? | A1: 1. No. 2. Yes.

Relevant facts and circumstances: You are employed by a non resident company (the Employer). You are considered an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA 1992). You have advised your employment income for the relevant income year will exceed X% of the total of your assessable income, reportable fringe benefits (RFBs) and reportable employer superannuation contributions (RESCs) for that year. You have stated that if you do not meet the conditions to claim a deduction for personal superannuation contributions for the relevant income year, you can arrange with your foreign employer to deposit funds directly into your self managed superannuation fund (SMSF) account by way of salary sacrifice. You have stated this arrangement will commence when your contract is renewed with the new contract commencing in 2013. You have confirmed your SMSF is a complying fund. You have stated you will arrange for your foreign employer to identify the funds as being paid as employer contributions with the trustees of the SMSF. You would like the arrangement to be approved by the ATO via the private ruling system.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 290-150. | Income Tax Assessment Act 1997 Subsection 290-150(1). | Income Tax Assessment Act 1997 Subsection 290-150(2). | Income Tax Assessment Act 1997 Subsection 290-150(3). | 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. | Income Tax Assessment Act 1997 Subsection 290-170(1). | Income Tax Assessment Act 1997 Subsection 290-170(3). | Income Tax Assessment Act 1997 Section 292-15. | Superannuation Guarantee (Administration) Act 1992 Section 12

Reasons for decision: Summary: You will not be eligible to claim a deduction for any personal superannuation contributions you make to your nominated superannuation fund as not all of the conditions for deductibility were met for the relevant income year. Provided an effective salary sacrifice arrangement is in place, the direct deposits made by your foreign employer into your complying superannuation fund will be treated as employer contributions and will attract the 15% concessional tax rate within the superannuation fund. | Detailed Reasoning - Deduction for personal deductible superannuation contributions: A person can claim a deduction for personal contributions made to a superannuation fund for the purpose of providing superannuation benefits for themselves (or their dependants after their death) under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997). However, the conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997 must also be satisfied for the person to claim the deduction. According to the facts, the conditions in section 290-160 have not been met. This will be discussed in further detail below. | Detailed Reasoning - Maximum earnings as an employee condition:: The condition in section 290-160 of the ITAA 1997 requires that if a taxpayer is engaged in any activities that result in them being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA), then less than 10% of the total of the following must be attributable to those activities: · their assessable income for the income year; · their reportable fringe benefits (RFB) for the income year; and · the total of their reportable employer superannuation contributions (RESC) for the income year. Subsection 290-160(1) states: · This section 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 appointment; (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). From the facts, you are considered an employee for the purposes of the SGAA 1992. Further you have advised your income from employment activities for the relevant income year will exceed X% of the total of your assessable income, reportable fringe benefits (RFBs) and reportable employer superannuation contributions (RESCs) for that year. As such, the maximum earnings as an employee condition is not satisfied and you are not eligible to claim a deduction for any personal superannuation contributions you make during the relevant income year. | Detailed Reasoning - Salary sacrifice arrangement: Salary sacrifice arrangements (SSAs) are not prescribed in tax legislation, however, there are guidelines laid down in Taxation Ruling 2001/10 (TR 2001/10). An SSA is an arrangement whereby an employee agrees to forego part of their total remuneration, which they would otherwise expect to receive as salary or wages, in return for the employer or someone associated with the employer providing benefits of a similar value. The main assumption made by the parties is that the employee is then taxed under the income tax laws only on the reduced salary or wages and that the employer is liable to pay FBT, if any, on the benefits provided. As you have stated your SMSF is a complying fund, FBT does not apply to the salary sacrificed superannuation contributions and therefore there are no issues arising from a non resident company having Australian FBT responsibilities. The SSA needs to be negotiated and agreed to prior to the work being performed. You have confirmed that the SSA will commence when your contract is renewed in the near future. As such, this requirement is satisfied and the SSA will be considered an effective SSA. You have also confirmed that you will arrange for your foreign employer to identify the funds as being paid as employer contributions with the trustees of your complying superannuation fund. Once identified as employer contributions in the fund, they will be taxed at the concessional rate of 15%. Based on the above, your foreign employer is permitted to make direct payments to your complying superannuation fund as employer contributions by way of salary sacrifice. These contributions will count towards your concessional contributions cap for the 2012-13 income year which is $25,000. As mentioned previously, you will be taxed under the income tax laws only on the reduced salary or wages. Please note the Commissioner does not give approval for salary sacrifice arrangements (SSAs) and cannot comment on how employers and employees make their employment contracts or when they should be amended.

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