Private ruling: Deductibility of personal superannuation contribution.
Date of advice: 11 November 2015
Published: January 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Can your client claim a tax deduction for personal superannuation contributions they make to their complying Australia superannuation fund in the 2015-16 income year? Advice/Answers Yes.

Relevant facts and circumstances: Your client is a non-resident for Australia taxation purposes. Your client lives and works overseas. Your client needs to lodge an Australian income tax return each year. The only income your client derives in Australia is from rental properties, interest on bank accounts and managed funds. Your client does not receive any superannuation support from their overseas employer. Your client will provide a valid notice of intent to claim personal superannuation contributions to their complying Australian superannuation fund. Your client's is under 65 years of age.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 26-55(2) | 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 | Superannuation Guarantee (Administration) Act 1992 Section 12 Further issues for you to consider | Not applicable. | Anti-avoidance rules | Not applicable.

Reasons for decision: Summary: Your client is eligible to claim a deduction for personal superannuation contributions made in the 2015-16 income year. | Detailed Reasoning - 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 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. In this case, your client will be making contributions to a complying superannuation fund. Therefore, 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) 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) of the ITAA 1997 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). Subsection 12(1) of the SGAA states that the terms employer and employee have their ordinary meaning. Subsections 12(2) to (11) of the SGAA expand the meaning of those terms and make provision to avoid doubt as to the status of certain persons. Taxation Ruling TR 2010/1 entitled 'Income Tax: superannuation contributions' (TR 2010/1) explains the Commissioner's view on the rules that apply if a personal contribution is to be deducted. In regards to whether a person is an employee for the purposes of the SGAA TR 2010/1 states at paragraph 59: A person will be engaged in an 'employment' activity if they are engaged in an activity in the income year that results in them being treated as an employee for the purposes of the SGAA. The term 'engaged' is not defined and takes its ordinary meaning. One of several meanings given to engaged is 'busy or occupied; involved'. Another meaning is 'under an engagement' where the ordinary meaning of 'engagement' is given as 'under an obligation or agreement'. In this case, your client is employed overseas. It is considered that your client is engaged in activities that results in them being treated as an employee for the purposes of the SGAA. 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 that employment must be less than 10% of their total assessable income and reportable fringe benefits for the 2015-16 income year. TR 2010/1 sets out amounts that are attributable to employment activities and states at paragraph 65: 65. In the application of the maximum earnings test, the relevant 'employment' activity need not be an activity in Australia. For a non-resident, the income attributable to employment outside Australia is not assessable income in Australia and so will not be counted in the maximum earnings test. A non-resident with Australian sourced income that is not attributable to 'employment' activities may therefore be able to deduct a personal superannuation contribution made to an Australian superannuation provider against their Australian sourced income. In this case your client's only income in Australia is derived from rental properties, interest on bank accounts and managed funds. In addition, your client lives and works overseas. A non-resident's income attributable to employment outside Australia is not assessable income in Australia and not counted in the maximum earnings test. Therefore, your client's total assessable income and reportable fringe benefits attributable is less than 10% of their total assessable income and reportable fringe benefits for the 2015-16 income year. Consequently, section 290-160 of the ITAA 1997 will be satisfied. | 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. This condition is satisfied as your client will lodge a valid notice with the trustee of their superannuation fund and expect to receive an acknowledgment of that notice. | Detailed Reasoning - Deduction limits:: The allowable deduction is limited under subsection 26-55(2) of the ITAA 1997 to the amount of assessable income remaining after subtracting all other deductions (excluding previous years' tax losses and any deductions for farm management deposits) from a taxpayer's assessable income. Thus a deduction for personal superannuation contributions cannot add to or create a loss in the relevant income year the deduction is to be claimed. | Detailed Reasoning - Contribution limits and the concessional contributions cap:: Concessional contributions made to superannuation funds in the 2015-16 income year are subject to an annual cap of $30,000. Concessional contributions include employer contributions (including contributions made under a salary sacrifice arrangement) and personal contributions claimed as a tax deduction by a person. | Detailed Reasoning - Conclusion:: As all of the conditions for deductibility under section 290-150 of the ITAA 1997 have been satisfied in relation to the 2015-16 income year, your client will be entitled to claim a deduction for the personal superannuation contributions made to a complying superannuation fund in the 2015-16 income year.