Private ruling: Personal deductible contributions
Date of advice: 6 October 2015
Published: October 2015
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Will you be subject to the maximum earnings test under section 290-160 of the Income Tax Assessment Act 1997 (ITAA 1997) in the 20YY-ZZ income year? | A1: No.

Relevant facts and circumstances: You terminated employment with your former employer in the 20WW-XX income year. You received a payment summary from your former employer in the 20YY-ZZ income year for income you derived in the 20WW-XX income year. You will be less than 75 years old in the 20YY-ZZ income year. Assumptions You have advised that during the 20YY-ZZ income year, you will not be engaged in any of the following activities: • holding an office or appointment; • performing functions or duties; • engaging in work; • doing acts or things; and the activities result in you being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 . You intend to make a personal superannuation contribution to a complying superannuation fund in the 20YY-ZZ 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 section 290-165 | Income Tax Assessment Act 1997 section 290-170

Reasons for decision: Summary: You will not be subject to the maximum earnings test because you will not be engaged in any employment activities during the 20YY-ZZ 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. For the purposes of this case and to address the specific question you have raised, attention is focussed on section 290-160 of the ITAA 1997. | 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). 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 TR2010/1, where a person is not employed at any time during the year, they are not subject to the maximum earnings test. Whilst you received a payment summary from your former employer in the relevant income year, you have advised that you terminated employment with your former employer in the 20WW-20XX income year, and that the income shown on the payment summary represents income that was derived in the 20WW-XXincome year that had not been paid to you. You have also advised that you have not been employed, nor are you currently employed, in the relevant income year, and that you will not engage in any activities in the 20YY-ZZ income year that would make you an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 . Accordingly, you will not be subject to the maximum earnings test under section 290-160 of the ITAA 1997. As you will be less than 75 years old in the 20YY-ZZ income year in which the intended contribution will be made, the age-related requirement of section 290-165 of the ITAA 1997 will be satisfied. Whilst you will not be subject to the maximum earning test under section 290-160 of the ITAA 1997 and will satisfy the age-related requirement of section 290-165 of the ITAA 1997, the conditions in sections 290-155 and section 290-170 of the ITAA 1997 must be satisfied for you to claim a deduction in the 20YY-ZZ income year. The latter provisions respectively deal with the requirement for the intended contribution to be made to a complying superannuation fund and that the notice of intent to deduct conditions are satisfied.