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Ruling

Subject: Deduction for personal superannuation contributions

Question

Can your client claim a deduction in respect of personal superannuation contributions for the 2008-09 income year under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer: No.

This ruling applies for the following period

1 July 2008 to 30 June 2009

The scheme commenced on

1 July 2008

Relevant facts and circumstances

In the 2008-09 income year your client was under 65 years of age.

Your client has made personal superannuation contributions to two complying superannuation funds (the Funds) in the 2008-09 income year.

Your client states that their contribution was made in order to obtain superannuation benefits for themself or their dependants in the event of their death.

Your client intends to claim a deduction for their personal superannuation contributions to the Funds.

Your client was employed in the 2008-09 income year by her employer (the Company).

Your client's employment income is more than 10% of her total assessable income and reportable fringe benefits for the 2008-09 income year.

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 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.

Superannuation Guarantee (Administration) Act 1992 Section 12.

Superannuation Guarantee (Administration) Act 1992 Subsection 12(11).

Summary

Your client is not entitled to claim a deduction for personal superannuation contributions in the 2008-09 income year because they have not satisfied the maximum earnings as an employee condition. Your client's income from employment activities represents more than 10% of their assessable income for the year.

Detailed reasoning

Personal deductible superannuation contributions:

From 1 July 2007, a person must satisfy the conditions in section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) before they can claim a deduction in respect of personal contributions made for the purpose of providing superannuation benefits for themselves, or their dependants after their death. The previous aged based limit that applied to deductions for personal superannuation contributions has been abolished. This means that a person will be entitled to claim a deduction for the whole amount of the contribution.

However, 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 be satisfied before a person can claim a deduction for the contributions made in that income year. These conditions are examined below.

Complying superannuation fund condition:

Section 290-155 of the ITAA 1997 states that:

If the contribution is made to a superannuation fund, it must be a complying superannuation fund for the income year of the fund in which you made the contribution.

Your client has made personal superannuation contributions to two complying superannuation funds (the Funds). Therefore, section 290-155 of the ITAA 1997 will be satisfied in this instance.

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 their assessable income and reportable fringe benefits must be attributable to those activities. 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 has not been enacted).

In this case your client was employed by the Company in the 2008-09 income year. Therefore, your client is an employee for the purposes of the SGAA during the 2008-09 income year.

Consequently, section 290-160 of the ITAA 1997 applies to your client in the 2008-09 income year.

Where section 290-160 of the ITAA 1997 applies to a person, subsection 290-160(2) of the ITAA 1997 states that:

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 income year;

(b) your reportable fringe benefits total for the income year;

(c) the total of your reportable employer superannuation contributions for the income year.

This means that in order to satisfy the condition set out under section 290-160 of the ITAA 1997, your client's total assessable income and reportable fringe benefits attributable to their employment must be less than 10% of their total assessable income and reportable fringe benefits for the 2008-09 income year.

In the 2008-09 income year, you have advised the total payments your client received as an employee of the Company totalled more than 10% of your client's total assessable income and reportable fringe benefits for the 2008-09 income year. As your client's employment income will be greater than 10% of their total assessable income and reportable fringe benefits for the 2008-09 income year, section 290-160 of the ITAA 1997 will not be satisfied.

The legislation itself is quite specific. It allows a deduction, subject to the necessary requirements, notably only where less than 10% of your client's assessable income and reportable fringe benefits are attributable to those activities of an employee. The legislation does not contain a discretion that can be exercised by the Commissioner to allow a deduction where the maximum earnings condition as an employee is not met.

As the condition in section 290-160 of the ITAA 1997 has not been satisfied, and all the conditions in subsection 290-150(2) of the ITAA 1997 must be satisfied in order to claim a deduction, it is not necessary to determine whether the conditions of 290-165 and 290-170 of the ITAA 1997 have been satisfied.

Conclusion:

As your client has not satisfied all the conditions in section 290-150 of the ITAA 1997, they are not eligible to claim a deduction for any personal superannuation contributions made in the 2008-09 income year.

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