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

Ruling: Q1: 1. Does your client need to satisfy the maximum earnings as an employee condition under subsection 290-160 of the Income Tax Assessment Act 1997 (ITAA 1997) for the 2012-13 income year? 2. Will your client's superannuation contributions be deductible under section 290-150 of the ITAA 1997 for the 2012-13 income year? | A1: 1. No. 2. Yes, to the extent that it does not add to or create a loss.

Relevant facts and circumstances: Your client is under 30 years of age. Your client previously worked for an employer in the building and construction industry. Your client's position was made redundant and their employment was terminated during the relevant income year. As your client worked for employers in the building and construction industry, they had any long service leave accrue in a third party fund on their behalf. This amount of X was paid to your client during the subsequent income year. You have stated that during the relevant income year your client commenced a self-employed business. Your client has a registered and active Australian business number (ABN). You have confirmed that your client only worked in their capacity as a sole trader under their ABN for the subsequent income year. Your client made a personal superannuation contribution of Y to their nominated superannuation fund (the Fund) during the subsequent income year. You have provided a copy of a letter from the trustees of the Fund acknowledging a valid notice under section 290-170 of the ITAA 1997 has been lodged with them.

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. | Income Tax (Transitional Provisions) Act 1997 Subsection 292-20(2). | Superannuation Guarantee (Administration) Act 1992 Section 12. | Superannuation Guarantee (Administration) Act 1992 Subsection 12(11). | Taxation Administration Act 1953 Subsection 357-110(1).

Reasons for decision: Summary: Your client is not engaged in activities that would result in them being considered an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 . Accordingly, the maximum earnings as an employee condition does not apply. Your client will be eligible to claim a deduction for the personal superannuation contributions they made to their nominated superannuation fund to the extent that it does not add to or create a loss for the subsequent income year. | 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. | Detailed Reasoning - Complying superannuation fund condition: The condition in section 290-155 of the ITAA 1997 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. As the Fund is a complying superannuation fund, this requirement is satisfied. | 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 1992), 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 for the income year; and · the total of their reportable employer superannuation contributions 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). The facts state that your client ceased employment during the relevant income year. After this date, your client commenced a self-employed business. Further, you have confirmed that your client only worked in their capacity as a self-employed taxpayer under their ABN for the subsequent income year. As your client did not engage in any of the activities listed in subsection 290-160(1), they are not considered an employee for the purposes of the SGAA 1992. Accordingly, the maximum earnings as an employee condition under section 290-160 of the ITAA 1997 does not apply to your client for the subsequent income year. | Detailed Reasoning - Age-related conditions:: Under subsection 290-165(2) of the ITAA 1997 the ability to claim a deduction ceases for contributions that are made after 28 days from the end of the month in which the person making the contribution turns 75 years of age. Your client meets this age-related condition. | Detailed Reasoning - Notice of intent to deduct conditions:: Section 290-170 of the ITAA 1997 requires a person to provide a valid notice of their intention to claim the deduction to the trustee of their superannuation fund. The notice must be given before the earlier of: · the date you lodge your income tax return for the income year in which the contribution was made; or · the end of the income year following the year in which the contribution was made. In addition, you must also have been given an acknowledgement of the notice by the trustee of the superannuation fund. A notice will be valid as long as the following conditions apply: · the notice is in respect of the contributions; · the notice is not for an amount covered by a previous notice; · at the time when the notice is given: § you are a member of the fund or the holder of the retirement savings account (RSA); § the trustee or RSA provider holds the contribution (for example, a notice will not be valid if a partial roll-over of the superannuation benefit which includes the contribution covered in the notice has been made); § the trustee or RSA provider has not begun to pay a superannuation income stream based on the contribution; or · before the notice is given: § a contributions splitting application has not been made in relation to the contribution; and; § the trustee or RSA provider to which you made the application has not rejected the application. You have provided a copy of a letter from the trustees of the Fund acknowledging a valid notice under section 290-170 of the ITAA 1997 has been lodged with them. Accordingly, this requirement is satisfied. | Detailed Reasoning - Contribution limits and the concessional contributions cap:: Concessional contributions made to superannuation funds in the 2012-13 income year are subject to an annual cap of $25,000. Concessional contributions include employer contributions (including contributions made under a salary sacrifice arrangement) and personal contributions claimed as a tax deduction by a person. A person will be taxed on concessional contributions over the cap at a rate of 31.5% (section 292-15 of the ITAA 1997 and sections 4 and 5 of the Superannuation (Excess Concessional Contributions Tax) Act 2007 ). | Detailed Reasoning - Conclusion:: Provided the deduction does not add to or create a loss, your client will be able to claim a deduction for the amount they contributed to their nominated superannuation fund as all of the conditions under section 290-150 of the ITAA 1997 have been satisfied for the subsequent income year.