Private ruling: Personal deductible contributions.
Date of advice: 5 October 2016
Published: November 2016
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is your client eligible to claim a deduction under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) for personal superannuation contributions made in the 20XX-YY income year? | A1: Yes.

Relevant facts and circumstances: Your Client has been in receipt of workers compensation payments for more than 10 years. You have advised that during the 20XX-YY income year, Your Client did not engage in any of the following activities: • holding an office or appointment; • performing functions or duties; • engaging in work; • doing acts or things that resulted in Your Client being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA). Your Client is a member of a complying superannuation fund. Your Client made a personal superannuation contribution in the 20XX-YY income year. In 20YY Your Client gave the trustee of the complying superannuation fund a Notice of intent to claim a tax deduction for personal super contributions of $X. Your Client was less than 75 years old in the 20XX-YY income year. Assumption The trustee of the complying fund will give Your Client an acknowledgment of the notice lodged in 20YY.

Relevant legislative provisions: 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 Section 290-165 | Income Tax Assessment Act 1997 Section 290-170 All references are to the ITAA 1997 unless otherwise indicated.

Reasons for decision: Summary: Your Client can deduct personal superannuation contributions made to their complying superannuation fund in the 20XX-YY income year. Your Client will not be subject to the maximum earnings as employee test in the 20XX-YY income year because they were not engaged in any employment activities during the 20XX-YY income year that resulted in them being treated as an employee for the purposes of the SGAA. | Detailed Reasoning - Personal superannuation contributions made in the 20XX-YY income year: An individual 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, provided certain conditions are met. Subsection 290-150(2) 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. | Detailed Reasoning - Complying superannuation fund condition: The condition in section 290-155 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. As Your Client made personal superannuation contributions to a complying superannuation fund, the requirements of section 290-155 are satisfied. | Detailed Reasoning - Maximum earnings as employee condition: Subsection 290-160(1) 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). 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.' As reiterated in paragraph 58 of TR 2010/1, where a person is not engaged in an 'employment' activity at any time during the year, they are not subject to the maximum earnings test. You have advised that Your Client has not engaged in any employment activities in the 20XX-YY income year that would result in them being treated as an employee for the purposes of the SGAA. Further, whilst Your Client was in receipt of workers compensation payments in the 20XX-YY income year, those payments were made to compensate Your Client for loss of work. Such compensation payments are not made in connection with an employee attending work or working during their ordinary hours of work. The employee is not remunerated for their labour or services. Your Client did not physically carry out any obligations or duties of a job or work and was therefore not engaged in employment activities. Accordingly, Your Client will not be subject to the maximum earnings as employee condition under section 290-160. | Detailed Reasoning - Age related condition: As Your Client was less than 75 years old at 30 June 2016, the age-related requirement of section 290-165 has been satisfied. | Detailed Reasoning - Notice of intent to deduct conditions: Whilst Your Client will not be subject to the maximum earning test under section 290-160, and has satisfied the age-related requirement of section 290-165, the conditions in section 290-170 must also be satisfied for Your Client to claim a deduction in the 20XX-YY income year. In accordance with section 290-170, Your Client has given the trustee of the fund a 'valid notice' (in the approved form) of Your Client's intention to claim a deduction. However, the trustee of the complying superannuation fund must also provide Your Client with an acknowledgment of receipt of the said notice before Your Client can claim a deduction in the 20XX-YY income year.