Edited version of private ruling

Authorisation Number: 1011623399769

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Ruling

Subject: Deduction for personal superannuation contributions

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

No.

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts:

Your client expects to be employed as an employee by a number of foreign companies and perform some work outside Australia during the income year.

Your client intends to approach any foreign employer and request a salary sacrifice to an Australian complying superannuation fund (the Fund), however expects that some may be reluctant to do so.

Consequently, your client intends to make personal superannuation contributions to the Fund in the income year and claim a tax deduction for the amount paid.

The contributions will be made in order to obtain superannuation benefits for your client.

In respect of total income earned from all the sources in and out of Australia, the total of your client's income attributable to employment activities will exceed 10% of their total income in the income year.

Your client is over 50 years of age in the income year.

Assumptions:

Subsection 357-110(1) of schedule 1 to the Taxation Administration Act 1953 (TAA) states that:

If the Commissioner considers that the correctness of a private ruling or an oral ruling would depend on which assumptions were made about a future event or other matter, the Commissioner may:

(a) decline to make the ruling; or

(b) make such of the assumptions as the Commissioner considers to be most appropriate.

In this case, in order to make a ruling the Commissioner would have to make assumptions on the following matters, central to whether your client can claim a deduction for personal superannuation contributions under subsection 290-150(1) of the ITAA 1997 for the income year:

Your client will give to the trustee of the superannuation fund a valid notice under paragraph 290-170(1)(a) of the ITAA 1997 of their intention to claim the deduction.

The trustee of the superannuation fund will give your client an acknowledgement of receipt of the notice under paragraph 290-170(1)(c) of the ITAA 1997.

Any deduction for personal superannuation contributions claimed will not add to or create a loss.

The Commissioner is willing to make assumptions on those matters, and accordingly makes a ruling for the income year in this instance.

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 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 Section 292-80

Taxation Administration Act 1953 Subsection 357-110(1)

Reasons for decision

Summary

The total of your client's income attributable to employment activities in and out of Australia will exceed 10% of their total income for the income year. Therefore, your client cannot claim a deduction in respect of the personal contributions made in the income year.

Detailed reasoning

Deductions for personal superannuation contributions

A person must satisfy the conditions in section 290-150 of the 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.

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 all be satisfied before a person can claim a deduction for the contributions made in that income year.

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.

In this case, your client has advised that the personal superannuation contributions will be made to an Australian complying superannuation fund. Therefore, this requirement will be satisfied.

Age-related conditions:

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.

As your client will be under age 75 when the proposed contributions are to be made, your client satisfies this requirement.

Notice of intent to deduct conditions:

Section 290-170 of the ITAA 1997 requires a person to provide a valid notice of their intention to claim the deduction to the trustee of their superannuation fund. The notice must be given before the earlier of:

· the date your client lodges their income tax return for the income year in which the contribution was made, or

· the end of the income year following the year in which the contribution was made.

In addition, your client must also have been given an acknowledgement of the notice by the trustee of the superannuation fund.

A notice will be valid as long as the following conditions apply:

· the notice is in respect of the contributions

· the notice is not for an amount covered by a previous notice

· at the time when the notice is given:

- your client is a member of the fund or the holder of the retirement savings account (RSA)

- the trustee or RSA provider holds the contribution (for example, a notice will not be valid if a partial roll-over of the superannuation benefit which includes the contribution covered in the notice has been made)

- the trustee or RSA provider has not begun to pay a superannuation income stream based on the contribution, or

· before the notice is given:

- a contributions splitting application has not been made in relation to the contribution, and

- the trustee or RSA provider has not rejected the application.

As noted above, it is assumed that your client will provide a valid notice to the trustee of the superannuation fund stating the intention to claim tax deductions in respect of the personal contributions made in the income year, and that the trustee of your client's superannuation fund will acknowledge that notice. Consequently, section 290-170 of the ITAA 1997 will be satisfied.

Maximum earnings as an employee condition:

Section 290-160 of the ITAA 1997 requires that if, in the income year in which the contribution is made, a person is engaged in any of the following activities:

· holding an office or appointment (for example, a director of a company)

· performing functions or duties

· engaging in work

· doing acts or things, and

· the activities result in that person being treated as an employee for the purposes of the SGAA assuming that subsection 12(11) of the SGAA had not been enacted, then the total of that persons assessable income and reportable fringe benefits attributable to the activities must be less than 10% of their total assessable income and reportable fringe benefits for the income year.

In respect of overseas employment activities, paragraph 65 of the Taxation Ruling TR2010/1 (TR2010/1) states:

In the application of the maximum earnings test, the relevant 'employment' activity need not be an activity in Australia…

Paragraph 66 of TR2010/1 provides further advice:

…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 income.

In this case, your client has advised that they are to be employed as an employee, not an independent contractor. They also advised that the total of their income attributable to employment activities in and out of Australia will exceed 10% of their total income for the income year.

Consequently, the condition under section 290-160 of the ITAA 1997 will not be satisfied.

As the condition in section 290-160 of the ITAA 1997 has not been satisfied, your client is not eligible to claim a deduction for any personal superannuation contributions made in the income year.

It should be noted that if any employer, including a foreign employer, makes a contribution to a complying fund for a taxpayer (including a salary sacrifice contribution), it will count towards that taxpayer's concessional contributions cap. They will be liable for excess contributions tax if the contributions from all sources exceeds this cap (currently $50,000 for a person over 50 years of age).

It should also be noted that personal deductible superannuation contributions also count towards a person's concessional contributions cap.

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