Private ruling: Deductibility of Personal Super Contributions
Date of advice: 15 May 2017
Published: September 2017
Ruling period: Income year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Will the taxpayer be entitled to claim a deduction under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) for personal superannuation contributions in the 2015-16 income year? | A1: Yes.

Relevant facts and circumstances: The taxpayer is under 75 years of age. The taxpayer operated as a sole trader for the 2015-16 income year and has business income. The taxpayer received a long service leave payment in the income year after they had ceased employment activity. In the 2015-16 income year the taxpayer contributed an amount as a personal superannuation contribution to their self-managed super fund. In the 2015-16 income year the taxpayer received a reimbursement from their former employer .

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 section 290-170 | Superannuation Guarantee (Administration) Act 1992 (SGAA)

Reasons for decision: Detailed Reasoning - Deduction for personal deductible superannuation contributions: 1. 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). 2. 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' . | Detailed Reasoning - Complying superannuation fund condition: 3. 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. 4. In this case, the taxpayer intends to make personal superannuation contributions to the Fund. As this fund is a complying superannuation fund, this requirement will be satisfied. | Detailed Reasoning - Maximum earnings as an employee condition: 5. 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 the following must be attributable to those 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. 6. This calculation is referred to as the 'maximum earnings test'. 7. Taxation Ruling 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. 8. In the 2015-16 income year the taxpayer is a sole trader and received long service leave payment in the year after they had ceased employment and no longer engaged in employment activity. 9. The taxpayer did not earn any assessable income that could be attributed to employment activities during the 2015-16 income year. 10. Based on the information provided, the taxpayer has not engaged in any 'employment activities' during 2015-16 income year that would make him an employee for the purposes of the SGAA. 11. Accordingly, the taxpayer will not be subject to the maximum earnings test, and section 290-160 of the ITAA 1997 will not apply to in determining the deductibility of his personal superannuation contributions for the 2015-16 income year. | Detailed Reasoning - Age-related condition: 12. 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. 13. The taxpayer has made contributions to the Fund in the 2015-16 income year. As the taxpayer is under the age of 75 in the 2015-16, he will satisfy the age-related condition in section 290-165 of the ITAA 1997. | Detailed Reasoning - Notice of intent to deduct conditions: 14. 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. 15. 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. 16. The notice of intent to deduct will be valid provided it satisfies the validity conditions listed above in subsection 290-170(2) of the ITAA 1997. | Detailed Reasoning - Deduction limited by amount specified in notice: 17. 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. 18. Provided the amount of the deduction the taxpayer will claim does not exceed the amount specified in his section 290-170 notice, they will also satisfy this requirement. | Detailed Reasoning - Deduction limits: 19. 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.

Summary of decision: The Taxpayer will be entitled to claim a deduction for any personal superannuation contributions they intend to make in the 2015-16 income year.