Private ruling: Subject Deductibility of personal superannuation contributions
Published: June 2012
Ruling period: Year ending 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: 1. Can your client claim a tax deduction for personal superannuation contributions to be made to a constitutionally protected fund (CPF) under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)? 2. Is there a limit on the amount that can be claimed as a deduction under section 290-150 of the ITAA 1997 in respect of those contributions? Advice/Answers 1. Yes. 2. No.

Relevant facts and circumstances: Your client is a member of a fund (the Fund). The Fund is a constitutionally protected fund (CPF) administered by a superannuation board. The Fund is also an exempt public sector superannuation scheme and a complying superannuation fund. You understand that under the rules which govern the Fund, your client is able to make personal superannuation contributions to the Fund. In this light, your client intends to make personal contributions in excess of the concessional contribution caps to the Fund in the 2011-12 income year. You have advised that as the Fund is a constitutionally protected fund the concessional contribution caps do not apply. Similarly, excess contributions tax should not apply to these contributions. Your client intends to provide a written notice to the Trustee for the Fund, stating that your client intends to claim a deduction for this contribution. Your client also intends to receive a notice for the 2011-12 income year from the Trustee for the Fund, acknowledging receipt of your client's notice of intent in respect of this contribution. You have advised that a deduction for the proposed contribution will not add to or create a loss for your client in the 2011-12 income year. Your client is a beneficiary of a discretionary trust (the Trust). The Trust will generate a taxable profit in the 2011-12 income year. The majority of the profit of the Trust will be distributed to your client for the year ended 30 June 2012. Your client is employed with an employer (the employer) averaging one day per week. Your client's salary and wages and reportable fringe benefits has been estimated and is being made by the employer as salary sacrifice contributions on your behalf to the Fund for the 2011-12 income year. Your client's salary and wages and reportable fringe benefits from the Trust has been estimated with an amount being made as salary sacrifice contributions to a self managed superannuation fund. As an employee of the Trust your client's duties consumed an average 50 hours per week. Your client's gross assessable income and reportable fringe benefits for the 2011-12 income year has been estimated and includes Trust distribution, salary and wages, interest and dividends. Your client over age 50 and under age 75. Assumptions You have been advised and agree with the following assumptions being made in issuing the Notice of Private Ruling for your client: · personal contributions will be made to the Fund for your client in the 2011-12 income year; and · the Fund will accept your client's personal contributions as your client will be gainfully employed in the 2011-12 income year; and · your client will provide a written notice to the Trustee of the Fund in accordance with section 290-170 of the ITAA 1997 stating that your client intend to claim as a tax deduction in respect of the personal contributions made in the 2011-12 income year and that in providing this notice will satisfy all the requirements of section 290-170; and · the Trustee of the Fund will provide a written notice for the 2011-12 income year under section 290-170 of the ITAA 1997 acknowledging receipt of your client's notice. · your client's income from employment will be less than 10% of your client's total assessable income in the 2011-12 income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 26-55(2). | Income Tax Assessment Act 1997 Subdivision 290C. | Income Tax Assessment Act 1997 Section 290-150. | Income Tax Assessment Act 1997 Subsection 290-150(2). | 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 Paragraph 290-160(1)(a). | Income Tax Assessment Act 1997 Paragraph 290-160(1)(b). | 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 Section 290-175. Summary | Your client is eligible to claim a deduction for personal superannuation contributions made to the Fund in the 2011-12 income year, provided the deduction does not add to or create a tax loss in that income year. | Detailed Reasoning | Personal superannuation contributions made in the 2011-12 income year | 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, subsection 290-150(2) of the ITAA 1997 provides that the conditions in sections 290-155, 290-160 (if applicable), 290-165 and 290-170 must all be satisfied before the 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 entitled 'Income Tax: superannuation contributions' . | 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 your client made the contribution. | In this instance, your client proposes to make personal contributions to the Fund. The Fund is an exempt public sector superannuation scheme, and is a complying superannuation fund subject to supervision by a government. Therefore, your client will satisfy this condition. | 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). Subsection 290-160(2) of the ITAA 1997 states: | To deduct the contribution, less than 10% of the total of the following must be attributable to the activities: | (a) your assessable income for the year; | (b) your reportable fringe benefits total for the income year; | (c) the total of your reportable employer superannuation contributions for the income year. | Where the person engages in any 'employment' activities in the income year a deduction can only be claimed where the assessable income, reportable fringe benefits total, and (from 1 July 2009) reportable employer superannuation contributions attributable to the 'employment' activities are together less than 10% of the person's total assessable income, reportable fringe benefits total, and reportable employer superannuation contributions in the income year that the contribution is made. Further, if the person has more than one period of engaging in 'employment' activities in an income year, the assessable income, reportable fringe benefits total, and reportable employer superannuation contributions attributable to each period of 'employment' is aggregated. | Where a person is engaged in activities during the income year that would make them an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA) then they will need to satisfy the 10% rule in order to claim a deduction for their personal superannuation contributions. The Commissioner has issued Taxation Ruling TR 2010/1 which deals with, among other matters, deductions for personal superannuation contributions. At paragraphs 57 and 58 of TR 2010/1, the Commissioner states: | 57. Those persons who are engaged in an 'employment' activity in the income year in which they make a contribution need to meet an earnings test if they are to deduct their contribution. | 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. | In this case, your client's total assessable income, reportable fringe benefits total and reportable employer superannuation contributions for the 2011-12 income year has been estimated. This includes income from the Trust, employment activities, interest, dividends and a Trust distribution. Your client has estimated salary sacrifice contributions from your client's employment activities to be made by the employer to the Fund. | In addition your client has estimated salary sacrifice contributions attributable to your client's employment activities, will be made by the Trust to a self managed superannuation fund. | Accordingly, your client's estimated assessable income, reportable fringe benefits and reportable employer superannuation contributions attributable to the activities that result in your client being treated as an employee for the purposes of the SGAA, will be less than 10% of your client's estimated assessable income for the 2010-11 income year. | Therefore, your client will satisfy the maximum earnings as an employee condition under section 290-160 of the ITAA 1997. | 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. | As your client is over age 50 and under age 75 when the proposed contributions are to be made, your client will satisfy the age-related conditions. | Notice of intent to deduct conditions | Section 290-170 of the ITAA 1997 provides that your client must give to the trustee of the complying superannuation fund (the Trustee) a valid notice, in the approved form, of your client's intention to claim a deduction in respect of the contribution, and your client must also have been given an acknowledgment of receipt of the notice by the Trustee. | Section 290-170 of the ITAA 1997 also provides that the notice must be given to the Trustee by the earlier of the date your client's income tax return is lodged or the end of the income year following the year in which the contribution was made. | In addition, the Trustee is required to acknowledge your client's notice without delay. | A notice will be valid as long as the following conditions are satisfied: | · the notice is in respect of the contribution; | · the notice is not for an amount covered by a previous notice; | · at the time when the notice is given: | · your client is a member of the fund; | · the fund trustee 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 fund trustee 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 fund trustee has not rejected the application. | You have advised that your client will provide a valid notice of your client's intention to claim a deduction to the Trustee for the Fund in respect of the proposed contribution. You have also advised that your client will receive a written notice from the Trustee acknowledging receipt of your client's notice of intent for the contribution. | Provided your client lodges a valid notice of intent with the Trustee for the Fund before your client's income tax return is lodged for the 2011-12 income year or by 30 June 2013, whichever is the earlier, and the Trustee duly acknowledges your client's notice, the notice of intent to deduct conditions under section 290-170 of the ITAA 1997 will be satisfied. | Deduction limited by amount specified in notice | Section 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. Provided the amount of the deduction your client will claim does not exceed the amount specified in your client's section 290-170 notice, your client will also satisfy this requirement. | 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 losses) from a taxpayer's assessable income. | Therefore a deduction for personal superannuation contributions cannot add to or create a loss. | You have advised that the deduction for the proposed contribution will not add to or create a loss for your client in the 2011-12 income year. Therefore it is accepted that the deduction for the contribution will not create or increase a loss in this income year. | Conclusion | As your client will satisfy all the required conditions in subdivision 290-C of the ITAA 1997, your client can claim a deduction in the 2011-12 income year for the entire personal contribution your client intends to make to the Fund provided the deduction does not add to or create a tax loss in this income year.


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