Private ruling: Deductibility of personal superannuation contributions
Published: March 2015
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Can the taxpayer claim a deduction for part of their personal superannuation contribution made in the 2012-13 income year? | A1: Yes

Relevant facts and circumstances: The taxpayer is a member of a complying superannuation fund (the Fund). The taxpayer's employment terminated during the 200X income year and the taxpayer has not been employed since the date of termination. During the relevant income year, the taxpayer made a personal superannuation contribution to the Fund. The taxpayer also provided the Fund's trustee with a notice of intention to claim a deduction for part of their personal superannuation contributions. Soon after, the Fund acknowledged receipt of the notice and provided an investment summary which shows that tax of 15% was deducted by the Fund. Before the end of the relevant income year, the taxpayer received a payment of from their former employer for unpaid long service leave. The taxpayer received a PAYG payment summary in relation to this payment during the subsequent income year. As the result of receiving this payment, the taxpayer believed that they were no longer eligible to claim a deduction for their personal superannuation contribution. Later on in the subsequent income year, the taxpayer lodged their tax return for the relevant income year. The taxpayer did not claim a deduction for personal superannuation contributions in their tax return. The taxpayer was under 75 years of age during the relevant income year.

Relevant legislative provisions: 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 Subsection 290-160(1) | Income Tax Assessment Act 1997 Subsection 290-160(2) | 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(2) | Income Tax Assessment Act 1997 Subsection 290-170(3) | Income Tax Assessment Act 1997 Subdivision 291-B | Superannuation Guarantee (Administration) Act 1992

Reasons for decision: Summary: The taxpayer was not subject to the maximum earnings test under section 290-160 of the ITAA 1997 in the relevant income year because the taxpayer was not engaged in any employment activities during that year. Based on the information provided, the taxpayer has satisfied all of the conditions for claiming a deduction for part of their personal superannuation contribution in the relevant income year. | Detailed Reasoning - Detailed reasoning: 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 ITAA 1997. However, the conditions in sections 290-155, 290-160 (if applicable), 290-165 and 290-170 of the ITAA 1997 must also be satisfied for the person to claim the deduction. | Detailed Reasoning - Maximum earnings as an employee condition: 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 duties; (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). For those persons who fall under the requirements outlined above, subsection 290-160(2) of the ITAA 1997 prescribes that a deduction for personal contributions can only be claimed where the sum of their: • assessable income • reportable fringe benefits total and • reportable employer superannuation contributions attributable to the employment activities is less than 10% of the total of that person's assessable income, reportable fringe benefits total and reportable employer superannuation contributions. This calculation is referred to as the maximum earnings test. The operation of the maximum earnings test is discussed in Taxation Ruling TR 2010/1 Income tax: superannuation contributions. Relevantly, paragraphs 58 and 59 state that: 58. 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. [emphasis added] 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' Furthermore, TR 2010/1 provides an example which refers to the 'maximum earnings test'. Paragraphs 88 and 89 of TR 2010/1 state: 88. Caitlin terminates her employment with Bling Pty Ltd on 30 June 2009 and was paid unused long service leave and annual leave on 3 July 2009. Caitlin made a contribution of $5,000 to her complying superannuation fund on 9 July 2009. Caitlin was not engaged in any employment activities for the 2009-10 income year. 89. As Caitlin was not engaged in any employment activities in the 2009-10 income year, she does not need to meet the earnings test in relation to her $5,000 contribution. The facts provided in this case indicate that the taxpayer was not employed at any time during the relevant income year that would make them an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 . Accordingly, the taxpayer is not subject to the maximum earnings test under section 290-160 of the ITAA 1997 in the 2012-13 income year. | 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, the taxpayer's personal superannuation contribution was made to a complying superannuation fund. Therefore, the complying superannuation fund condition was satisfied in the relevant income year. | Detailed Reasoning - Age-related conditions: Relevantly, 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. As the taxpayer was under 75 years of age during the relevant income year when the contribution was made, the taxpayer has satisfied the age-related condition for the contribution in the relevant income year. | Detailed Reasoning - Notice of intent to deduct conditions: According to section 290-170 of the ITAA 1997, in order to deduct a contribution, the taxpayer is required to provide to the trustee of the Fund a valid notice, in the approved form, of their intention to claim a deduction. The notice must be given by the earlier of: (a) the date the taxpayer lodges their income tax return for the income year in which the contribution is made; or (b) the end of the following income year. A notice of intent to deduct will not be valid if one or more of the following conditions in subsection 290-170(2) of the ITAA 1997 are satisfied: (a) the notice is not in respect of the contribution; (b) the notice includes all or 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... in relation to the contribution; and (ii) the trustee or RSA provider had not rejected the application. The facts provided in this case indicate that the taxpayer provided a valid notice to the trustee of the Fund stating their intention to claim a deduction for part of their personal superannuation contribution. The notice was provided to the trustee of the Fund before the taxpayer lodged their tax return for the relevant income year and before 30 June 2014. As such, the taxpayer was able to provide the notice of intent to deduct before the due date. In addition to the requirement that the taxpayer must provide a valid notice before the due date, subsection 290-170(3) of the ITAA 1997 states that: the trustee or provider must, without delay, give you an acknowledgement of a valid notice, subject to subsection (4). The facts in this case show that the Fund provided the taxpayer with an acknowledgement of their notice of intent to deduct. In relation to the contribution in the relevant income year, the taxpayer has satisfied the conditions under sections 290-155, 290-165 and 290-170 of the ITAA 1997 and was not required to satisfy section 290-160 of the ITAA 1997. As such, the taxpayer can claim a deduction of the amount stated in the notice of intention to deduct. | Detailed Reasoning - Further issues to consider: As the taxpayer did not claim a deduction for their personal superannuation contribution in their relevant tax return, they will need to amend their tax return in order to include the deduction. Subdivision 291-B of the ITAA 1997 imposes a cap on the amount of superannuation contributions that may receive concessional tax treatment for an individual in an income year. Concessional contributions include employer contributions (including contributions made under a salary sacrifice arrangement) and personal contributions claimed as a tax deduction by a person. The concessional contributions cap for the relevant income year is $25,000.