Private ruling: Deductibility of personal superannuation contributions
Date of advice: 23 February 2016
Published: April 2016
Ruling period: Year ending 30 June 20XX.
Date scheme commenced: 1 July 20XX.

Ruling: Q1: Is your client entitled to claim a deduction for a personal superannuation contribution made in the relevant income year under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. | Q2: Will your client's contribution to a constitutionally protected fund be included in their concessional contributions cap for the relevant income year? | A2: No.

Relevant facts and circumstances: Your client's date of birth is on a date in the 19XX-XX income year. Your client has made a personal superannuation to an Australian superannuation fund (the Fund) before 30 June 20XX. The Fund is a complying superannuation fund, and is an untaxed constitutionally protected fund. The contribution was made for the purpose of providing superannuation benefits for your client or their dependants if they die before becoming entitled to these benefits. Your client is retired from work and not employed in any capacity. In your application you stated that 100% of your client's income for the relevant income year is attributable to non-personal exertion sources. Your client made a personal contribution of a certain amount to the Fund. The deduction for the contribution will not add to or create a loss for your client Your client provided a written notice to the trustee of the superannuation fund stating their intention to claim a deduction in respect of their contributions. Your client received an acknowledgement notice issued by the trustee of the superannuation fund acknowledging their intention to claim a deduction.

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 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 Subsection 290-165(2). | 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(2). | Income Tax Assessment Act 1997 Paragraph 290-170(2)(c)(iii) | Income Tax Assessment Act 1997 Section 290-175 | Income Tax Assessment Act 1997 Section 291-25. | Income Tax Assessment Act 1997 Section 291-25(2).

Reasons for decision: Summary: Your client can claim a deduction for the superannuation contribution he made in the relevant income year as all the conditions of Section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) have been satisfied. As the Fund is a constitutionally protected fund, the contribution made by your client in the relevant income year will not count towards their concessional contribution cap for that income year. | Detailed Reasoning - Deduction for personal deductible superannuation contributions: A person must satisfy the conditions in section 290-150 of the ITAA 1997 before they 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). Subsection 290-150(2) of the ITAA 1997 provides that the conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997 must also be satisfied before a person can claim a deduction for the contributions made in that income year. These conditions are explained in detail in Taxation Ruling TR 2010/1 (TR 2010/1) ' Income tax: superannuation contributions' . Your client made a personal contribution to the Fund before 30 June 2015. | 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 in which the contribution is made. In this case, your client has made a personal superannuation contribution to the Fund. As this 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), then any income be attributable to the following 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. must be less than 10% of the taxpayer's total income for that income year. This calculation is referred to as the 'maximum earnings test'. Taxation Ruling TR 2010/1 Income Tax: Superannuation Contributions (TR 2010/1) outlines the Commissioner's view of the requirements to be satisfied for a deduction of superannuation contributions. Amongst other things, the Commissioner discusses the operation of the maximum earnings as an employee condition. Paragraph 58 states that: Those persons who have not engaged in an 'employment' activity in the income year in which they make a contribution, such as persons who although receiving workers' compensation payments are not employed at any time during the year, are not subject to the maximum earnings test. You have advised that for the relevant income year your client: • is retired from work and not employed in any capacity; and • derived 100% of their income from non-personal exertion sources. Based on the information provided, your client has not, and will not, be engaged in any 'employment activities' during relevant income year that would make them an employee for the purposes of the SGAA. Accordingly, your client's income will not be subject to the maximum earnings test, and section 290-160 of the ITAA 1997 will not apply to your client in determining the deductibility of their personal superannuation contributions for the relevant income year. | Detailed Reasoning - Age-related condition: 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. You have advised that your client made contributions to the Fund in the relevant income year. As your client is under the age of 75 in the relevant income year, they will satisfy the age-related condition in section 290-165 of the ITAA 1997. | Detailed Reasoning - Notice of intent to deduct conditions: Subsections 290-170(1) and (2) of the ITAA 1997 set out the notice and validity requirements which must be satisfied to claim a deduction for superannuation contributions. Subsection 290-170(1) of the ITAA 1997 requires a valid notice of intent to claim a deduction in the approved form be provided to the superannuation or RSA provider. The notice must be provided before the taxpayer lodges his or her income tax return for the year or within 12 months of the end of the income year if the taxpayer had not lodged his or her return by that time. The trustee must also acknowledge receipt of the notice. Subsection 290-170(2) of the ITAA 1997 requires the following conditions to be satisfied for a notice of intent to deduct to be valid: a) the notice is not in respect of the contribution; b) the notice includes all or a part of an amount covered by a previous notice; c) when you gave the notice: (i) you were not a member of the fund or the holder of the * RSA; or (ii) the trustee or * RSA provider no longer holds the contribution; or (iii) the trustee or RSA provider has begun to pay a * superannuation income stream based in whole or part on the contribution; d) before you gave the notice: (i) you had made a contributions-splitting application (within the meaning given by the regulations) in relation to the contribution; and (ii) the trustee or RSA provider to which you made the application had not rejected the application. Your client provided a valid notice of intent to claim the deduction to the Fund. The Fund then issued an acknowledgement of the notice. On this basis, this requirement will be satisfied. | Detailed Reasoning - Deduction limited by amount specified in notice: Subsection 290-175 of the ITAA 1997 states that the deduction cannot be more than the amount covered by the notice given under section 290-170 of the ITAA 1997. Provided the amount of the deduction your client has claimed does not exceed the amount specified in his section 290-170 notice, your client will also satisfy this requirement. | Detailed Reasoning - Deduction limits: Allowable deductions are limited under subsection 26-55(2) of the ITAA 1997 to the amount of assessable income remaining after subtracting all other deductions from a taxpayer's assessable income. Furthermore, allowable deductions cannot create or increase a loss to be carried forward. You have advised that the deduction for the proposed contribution will not add to or create a loss for your client. Accordingly your client will satisfy this condition. | Detailed Reasoning - Constitutionally protected fund: It is noted that the Fund is a constitutionally protected fund (CPF). Subparagraph 291-25(2)(c)(iii) of the ITAA 1997 specifically excludes contributions made to a CPF from the definition of concessional contributions. This means that the Taxpayer's contribution to the Fund will not be concessional contributions. In view of this, the contributions to the Fund in the relevant income year will not count towards the Taxpayer's concessional contributions cap for that year. Subparagraph 292-90(2)(c)(iv) of the ITAA 1997 specifically excludes 'a contribution made to a constitutionally protected fund (other than a contribution included in the contributions segment of your superannuation interest in the fund)' from the definition of a non-concessional contribution. Subsection 307-220(1) of the ITAA 1997 defines the 'contributions segment of a superannuation interest' as: so much of the value of the interest as consists of contributions made after 30 June 2007, to the extent that they have not been and will not be included in the assessable income of the superannuation provider in relation to the superannuation plan in which the interest is held. However, the operation of subsection 307-220(2) of the ITAA 1997 provides that for a CPF, the only contributions that would be included in the contributions segment are contributions that would be non-concessional contributions if the fund was not a CPF. Therefore, in your client's case, if we were to treat the Fund as if it were not a CPF, the contributions in the relevant income year would be included in the assessable income of the Fund and therefore does not form part of the Taxpayer's contributions segment. Since the contributions that the Taxpayer made to the Fund do not form part of the contributions segment of the Taxpayer's superannuation interest in the Fund, the contributions do not fall under the definition of a non-concessional contribution. In view of this, the contributions to the Fund in the relevant income year will not count towards either the concessional or non-concessional contributions cap of the taxpayer for that income year. | Detailed Reasoning - Conclusion: As your client will satisfy all the required conditions for deductibility under section 290-150 of the ITAA 1997, your client can claim a deduction for the entire personal superannuation contribution made to the Fund in the relevant income year. As the Fund is a constitutionally protected fund, the contributions in the relevant income year will not count towards either the Taxpayer's concessional or non-concessional contributions cap for that year.