Private ruling: Deductibility of personal superannuation contributions
Published: March 2015
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Is your client entitled to claim a deduction for personal superannuation contributions made in the 2014-15 income year under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: Your client is over 60 years of age. Your client is retired from work and not employed in any capacity. Your client intends to make personal superannuation contributions, not exceeding the concessional contributions cap, to a superannuation fund (the Fund) before 30 June 2015 and claim a deduction for the contribution. The Fund is a complying superannuation fund. The contributions will be made for the purpose of providing superannuation benefits for your client or their dependants if they die before becoming entitled to these benefits. Your client will not receive any reportable fringe benefits or make any reportable superannuation contributions to a complying superannuation fund in the 2014-15 income year. Your client's income for the 2014-15 income year comprises of: • a pension income stream; and • workers' compensation income. Your client will provide a written notice to the trustee of the superannuation fund stating your client's intention to claim a deduction in respect of the contributions. Your client expects to receive an acknowledgement notice issued by the trustee of the superannuation fund acknowledging your client's intention to claim a deduction, and will not claim a deduction until this is received. A deduction for the proposed contribution will not add to or create a loss for your client in the 2014-15 income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 26-55(2). | Income Tax Assessment Act 1997 Section 290-150. | Income Tax Assessment Act 1997 Subsection 290-150(1). | Income Tax Assessment Act 1997 Subsection 290-150(2). | Income Tax Assessment Act 1997 Subsection 290-150(3). | Income Tax Assessment Act 1997 Section 290-155. | Income Tax Assessment Act 1997 Section 290-160. | 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(1). | Income Tax Assessment Act 1997 Subsection 290-170(2). | Income Tax Assessment Act 1997 Paragraph 290-170(2)(c)(iii) | Income Tax Assessment Act 1997 Section 290-175 | Income Tax Assessment Act 1997 Section 291-25. | Income Tax Assessment Act 1997 Section 291-25(2).

Reasons for decision: Summary: Your client can claim a deduction for the proposed superannuation contribution your client will make in the 2014-15 income year as all the conditions of Section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) will be satisfied. The contribution will be a concessional contribution in this income year. | Detailed Reasoning - Deduction for personal deductible superannuation contributions: 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). 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' . Your client intends to make a personal contribution, not exceeding the concessional contributions cap, to a superannuation fund (the Fund) before 30 June 2015. | 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 in which the contribution is made. In this case, your client 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: 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. This calculation is referred to as the 'maximum earnings test'. 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. You have advised that for the 2014-15 income year, your client: • is retired from work and not employed in any capacity; • will only receive pension payments and worker's compensation income; and • will not receive any income from an employer, receive any RFB or make any RESC payments. Based on the information provided, your client has not, and will not, be engaged in any 'employment activities' during 2014-15 income year that would make your client an employee for the purposes of the SGAA. Accordingly, your client's workers' compensation and pension income will not be subject to the maximum earnings test, and section 290-160 of the ITAA 1997 will not apply to your client in determining the deductibility of the personal superannuation contributions for the 2014-15 income year. | Detailed Reasoning - Age-related condition: 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. You have advised that your client intends to make contributions to the Fund in the 2014-15 income year. As your client is under the age of 75 in the 2014-15 income year, the age-related condition in section 290-165 of the ITAA 1997 is satisfied. | Detailed Reasoning - Notice of intent to deduct conditions: 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. 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. Subsection 290-170(2) of the ITAA 1997 requires the following conditions to be satisfied for a notice of intent to deduct to be valid: a) the notice is not in respect of the contribution; b) the notice includes all or a 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 (within the meaning given by the regulations) in relation to the contribution; and (ii) the trustee or RSA provider to which you made the application had not rejected the application. Your client intends to provide a valid notice of intent to claim the deduction to the Fund once the proposed contribution is made. Your client will await an acknowledgment of receipt of the notice from the trustee of the Fund prior to claiming the deduction. Your client's notice of intent to deduct will meet the notice conditions in subsection 290-170(1) of the ITAA 1997 provided your client lodges this notice with the Fund trustee before your client's income tax return is lodged for the 2014-15 income year, or by 30 June 2016 (whichever is the earlier), and the trustee duly acknowledges this notice. Your client's 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. Note that your client will not fail to satisfy the validity condition in section 290-170(2)(c)(iii) due to your client's current receipt of pension income from another superannuation fund. This income stream is derived from a separate superannuation provider and does not contain any part of your client's proposed contribution. | Detailed Reasoning - Deduction limited by amount specified in notice: 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. 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. | Detailed Reasoning - Deduction limits: 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. You have advised that the deduction for the proposed contribution will not add to or create a loss for your client. Accordingly your client will satisfy this condition. | Detailed Reasoning - Conclusion: As your client will satisfy all the required conditions for deductibility under section 290-150 of the ITAA 1997, your client can claim a deduction for the entire personal superannuation contribution made to the Fund in the 2014-15 income year. | Detailed Reasoning - Concessional contributions: Under subsection 291-25(2) of the ITAA 1997, concessional contributions include personal contributions claimed as a tax deduction. For the 2014-15 income tax year the concessional contributions cap is $35,000. Your client intends to contribute an amount to a nominated superannuation fund in the 2014-15 income year. As this amount will be fully tax deductible, this contribution will be a concessional contribution in this income year. Any additional amounts contributed during the 2014-15 income year will exceed the concessional contributions cap, and will count towards your client's non-concessional (after-tax) contributions cap.