Private ruling: Deduction for personal superannuation contributions
Published: May 2012
Ruling period: Year ended 30 June 2012.
Date scheme commenced: 1 July 2011.

Ruling: Q1: 1. Does your client need to satisfy the maximum earnings as an employee condition under subsection 290-160 of the Income Tax Assessment Act 1997 (ITAA 1997) for the 2011-12 income year? 2. Will the superannuation contributions be deductible under section 290-150 of the ITAA 1997 for the 2011-12 income year? | A1: 1. Yes. 2. No.


Relevant legislative provisions: 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 Section 290-170. | Income Tax Assessment Act 1997 Subsection 290-170(1). | Income Tax Assessment Act 1997 Subsection 290-170(3). | Income Tax Assessment Act 1997 Section 292-15. | Superannuation Guarantee (Administration) Act 1992 Section 12 | Superannuation Guarantee (Administration) Act 1992 Subsection 12(3) | Superannuation Guarantee (Administration) Act 1992 Subsection 12(11)

Reasons for decision: Summary: Your client is engaged in activities that would result in him being considered an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 . Accordingly, the maximum earnings as an employee condition applies. Your client will not be eligible to claim a deduction for the personal superannuation contributions made to their nominated superannuation fund as not all of the conditions for deductibility were met for the 2011-12 income year. | Detailed Reasoning - Deduction for personal deductible superannuation contributions: A person 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) under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997). However, the conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997 must also be satisfied for the person to claim the deduction. According to the facts, the conditions in section 290-160 have not been met. This will be discussed in further detail below. 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. Subsection 290-160(1) 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 appointment; (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). Under subsection 12(1) of the SGAA, if a person is an employee at common law, that person is an employee under the SGAA. However, where a common law employment relationship is not established, subsection 12(3) of the SGAA extends the definition to classify as an employee a person who works under a contract that is wholly or principally for the labour of the person. Based on the copy of the employment contract provided, your client is acting within the role of an employee. This is apparent as your client is working under a contract that is wholly or principally for their labour. As such, an employee-employer relationship exists. Further, the contract also makes reference to your client's entitlement to other benefits such as paid annual leave and sick leave, which is commonplace for employee-employer relationship based contracts. Based on the above, your client is considered an employee for the purposes of the SGAA 1992. In the application of the maximum earnings test, the relevant 'employment' activity need not be an activity in Australia. The 'employment' income of an Australian resident employed overseas by a foreign employer will be counted in the maximum earnings test if the income is assessable in Australia. As your client's rental property is held jointly, they are considered to be in an income tax partnership with the other entity that holds ownership interest. Subsection 92(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that assessable income of a partner includes the partner's interest in the net income of the partnership. In addition, subsection 92(2) provides that a partner's share of the partnership loss is a deduction. For the purposes of the 10% test however, we are only interested in assessable income before any deductions are applied. You anticipate your client's share of gross rental income to be $D and therefore your client's total assessable income, RFB, and RESC is $E. As your client's foreign employment income of $C represents more than 10% of this total, they have not satisfied the maximum earnings as an employee condition pursuant to section 290-160 of the ITAA 1997. | Detailed Reasoning - Conclusion:: As not all of the conditions for deductibility under section 290-150 of the ITAA 1997 have been satisfied in relation to the 2011-12 income year, your client is not entitled to claim a deduction for the personal superannuation contributions made, or to be made, to their nominated superannuation fund in the 2011-12 income year.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts and circumstances | Your client is under 55 years of age. | Your client is employed by a non resident company (the Company) as part of the Company's management team. | Your client's new contract, with the abovementioned company, commenced during the 2011-12 income year and indicated an employment period of three years. | The contract of employment (the contract) between the Company and your client (the employee) outlines the following: | As a member of the Company's management team the employee will be required to devote the whole of their time, efforts and skills during the hours of work and such other times as may be reasonably necessary to the performance of assigned duties. | Reasonable work related travel expenses, including fares, accommodation and meals, will be reimbursed by the Company. | Employee is to provide, at their own cost, mobile phone, laptop computer and software etc. | Employee is required to maintain their own Comprehensive Medical Insurance Cover. | A fully maintained, furnished and air conditioned house will be provided to employee by the Company. | A fully serviced and maintained, inclusive of fuel, vehicle will be supplied by the Company and will be available for use within the work site area. A driver will be allocated as and when required. | Employee will receive a specified amount of paid annual leave and paid sick days per year. | Total remuneration, after Indonesian income tax, will be lump sum of USD $X paid on a monthly basis. | The Company is responsible for obtaining and meeting the costs of all permits required for the employee to legally work and reside in the country of employment. | Employee can terminate their employment with the Company giving 4 weeks notice. The Company can terminate their employment for any reason by giving one month notice of payment of one month salary in lieu of notice. | You have provided a breakdown of your client's anticipated assessable income for the 2011-12 financial year which is as follows: | · Jointly owned investment property loss $B | You have stated that your client's rental properties are jointly owned. | You estimate your client's share of gross rental income for the 2011-12 income year to be $D. | Your client wishes to claim a deduction for personal superannuation contributions made to his nominated super fund during the 2011-12 income year.