Private ruling: Deductibility of personal superannuation contributions
Published: April 2013
Ruling period: 2012-13 income year.
Date scheme commenced: 1 July 2012

Ruling: Q1: Is your client entitled to claim a deduction for personal contributions to an Australian superannuation fund where they are employed overseas by a non-resident employer who does not provide superannuation support? | A1: No.

Relevant facts and circumstances: Your client is employed overseas by a company based in that foreign country (the Company). The Company does not pay superannuation on behalf of your client. In the relevant income year, your client will earn an amount exceeding 10% of your client's total assessable income. In the relevant income year, your client intends to contribute an amount to a complying superannuation fund. In respect of this amount, your client intends to claim a personal deduction.

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 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.

Reasons for decision: Summary: Your client is an employee for the purposes of the Superannuation Guarantee legislation and his income from employment activities exceed 10% of his assessable income for the year. As your client has not satisfied the maximum earnings as an employee condition they are not entitled to claim a deduction for personal superannuation contributions in the relevant income year. | Detailed Reasoning - Personal deductible superannuation contributions:: A person must satisfy the conditions in section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) before they can claim a deduction in respect of personal contributions made for the purpose of providing superannuation benefits for themselves, or their dependants after their death. However, subsection 290-150(2) of the ITAA 1997 provides that the conditions in sections 290-155, 290-160, 290-165 and 290-170 must be satisfied before a person can claim a deduction for the contributions made in that income year. | 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 their assessable income and reportable fringe benefits must be attributable to those activities. 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 has not been enacted). In this case your client was employed by and received salary wages from an employer located overseas during the relevant income year. As your client was engaged in employment during the income year, your client will be an employee for the purposes of the SGAA. Despite your client's employer being an overseas based company, this does not preclude your client from being treated as an employee for the purposes of section 12 of the SGAA. Section 27 of the SGAA deals with general exclusions for the purposes of section 19. Section 27 states The following salary or wages are not to be taken into account for the purpose of making a calculation under section 19: … (c) salary or wages paid by an employer who is not a resident of Australia to an employee who is a resident of Australia for work done outside Australia; … Section 19 of the SGAA deals with determining an employer's individual superannuation guarantee shortfall in respect of an employee. Section 12 of the SGAA on the other hand is a definition section that deals with what constitutes an 'employer' or an 'employee' for the purposes of the SGAA. The exclusion under section 27 does not operate to preclude a person who falls with term 'employee' from being an employee for the purposes of the SGAA. It merely excludes an employer from the liability to pay superannuation guarantee shortfall amounts under section 19 in respect of persons who are employees for the purposes of the SGAA. Further, section 290-160 of the ITAA 1997 interacts with section 12 of the SGAA and not section 27 of the SGAA. Accordingly, the operation of section 27 of the SGAA will not impact on the application of section 290-160 of the ITAA 1997. Consequently, section 290-160 of the ITAA 1997 applies to your client in the relevant income year. Where section 290-160 of the ITAA 1997 applies to a person, subsection 290-160(2) states that: To deduct the contribution, less than 10% of the total of the following must be attributable to the activities: (a) your assessable income for the income year; (b) your reportable fringe benefits total for the income year; (c) the total of your reportable employer superannuation contributions for the income year. This means that in order to satisfy the condition set out under section 290-160 of the ITAA 1997, your client's total assessable income and reportable fringe benefits attributable to their employment must be less than 10% of your client's total assessable income and reportable fringe benefits for the relevant income year. In the relevant income year, you have advised that the income relating to your client's employment activities exceed 10% of his total assessable income and reportable fringe benefits. As your client's employment income will be greater than ten percent of his total assessable income and reportable fringe benefits for the relevant income year, section 290-160 of the ITAA 1997 will not be satisfied. The legislation itself is quite specific. It allows a deduction subject to satisfying the necessary legislative requirements - notably, in the case of an employee, the requirement that less than 10% of the person's total assessable income and reportable fringe benefits are attributable to those activities as an employee. The legislation does not contain a discretion that can be exercised by the Commissioner to allow a deduction where the maximum earnings as an employee condition is not met. As noted earlier, in order to be able to claim a deduction under section 290-150 of the ITAA 1997 all the conditions in subsection 290-150(2) of the ITAA 1997 must be satisfied. Failure to satisfy just one of the necessary conditions will prevent a deduction from being able to be claimed. In the present case, the maximum earnings as an employee condition has not been met. Therefore, it is not necessary to determine whether any of the other conditions listed in subsection 290-150(2) of the ITAA 1997 have been satisfied. | Detailed Reasoning - Conclusion:: As your client has not satisfied all the conditions in section 290-150 of the ITAA 1997, your client is not eligible to claim a deduction for any personal superannuation contributions made in the relevant income year.