Private ruling: Deducting employer contributions
Date of advice: 29 September 2016
Published: November 2016
Ruling period: Income year ended 30 June 2016
Date scheme commenced: July 2015

Ruling: Q1: For the purposes of section 290-60 of the Income Tax Assessment Act 1997 (ITAA 1997), is a superannuation contribution deemed to be made by an employer on the day the monies are paid to the Small Business Superannuation Clearing House? | A1: No. | Q2: Is the employer entitled to claim a tax deduction in the 2015-16 income year under section 290-60 of the ITAA 1997 for a superannuation contribution that was received by the superannuation fund in early July 2016? | A2: No.

Relevant facts and circumstances: In late June 2016, an employer (the Employer) made a superannuation contribution to a Small Business Superannuation Clearing House (SBSCH) for an employee (the Employee). The same contribution was received by a superannuation fund (the Fund) from the SBSCH during early July 2016.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 290-60 | Income Tax Assessment Act 1997 Subsection 290-60(3) | Income Tax Assessment Act 1997 Section 290-70 | Income Tax Assessment Act 1997 Section 290-75 | Income Tax Assessment Act 1997 Section 290-80 | Income Tax Assessment Act 1997 Section 290-80

Reasons for decision: Summary: For the purposes of section 290-60 of the ITAA 1997, the contribution made by the Employer to the SBSCH in late June 2016 is treated as having been made in early July 2016. That is, in the 2016-17 income year. Therefore, the Employer is not entitled to claim a tax deduction in respect of the contribution in the 2015-16 income year. | Detailed Reasoning - Detailed reasoning: Under section 290-60 of the ITAA 1997, an employer is entitled to claim a deduction for a contribution to a superannuation fund for the purpose of providing superannuation benefits for a person who is the employer's employee if the conditions in sections 290-70, 290-75 and 290-80 of the ITAA 1997 are also satisfied. However, subsection 290-60(3) of the ITAA 1997 states that the deduction can only be claimed in respect of the income year in which the employer made the relevant superannuation contribution. The Commissioner of Taxation has provided guidance on when a contribution is considered to be made to a superannuation fund in Taxation Ruling TR 2010/1 Income tax: superannuation contributions (TR 2010/1). At paragraph 186, TR 2010/1 discusses contributions to a clearing house in the context of 'when' a contribution is made and states: 186. When a financial institution agrees to accept a payment instruction it notifies the receiving institution of the details of the payment. In Australia there are several different clearing systems for the transferring of information and netting of amounts to be transferred between institutions. The clearing rules of these systems bind the financial institutions but not the customers. Most small payments between institutions are not processed in real time but are subject to deferred net settlement which occurs overnight. As such, it is not until an amount is credited to a bank account of the superannuation provider that a contribution will be taken to be made. Based on the above, superannuation contribution that was made by the Employer to the SBSCH in late June 2016, and received by the Fund in early July 2016, is treated for the purposes of section 290-60 of the ITAA 1997 as having been made by the Employer in early July 2016. That is, in the 2016-17 income year. Consequently, in accordance with subsection 290-60(3) of the ITAA 1997, the Employer is not entitled to claim a tax deduction for the relevant contribution in the 2015-16 income year because the contribution was not made in that year.