Edited version of private ruling

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Ruling

Subject: Deduction for personal superannuation contribution

Question

Can your client claim a deduction for personal superannuation contributions to be made in the 2010-11 income year under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Advice/Answers

Yes.

This ruling applies for the following period

Year ending 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

Your client meets the age-related condition.

Your client has retired from work and is not employed in any capacity.

Your client intends to make a personal contribution to his superannuation fund before 30 June 2011 and claim a deduction for the contribution.

The superannuation fund (the Fund) your client intends to make the payment to is a complying superannuation fund.

A valid notice under section 290-170 of the Income Tax Assessment Act 1997 (ITAA 1997) will be lodged with the trustee of the Fund and the trustee of the Fund will acknowledge that notice.

The contribution is being made for the purpose of providing superannuation benefits to your client or your client's dependants if they die before or after becoming entitled to the benefits.

The deduction to be claimed under section 290-150 of the ITAA 1997 will not add to or create a loss.

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 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 (Transitional Provisions) Act 1997 Subsection 292-20(2).

Reasons for decision

Summary

Your client is entitled to claim a deduction for personal superannuation contributions to be made in the 2010-11 income year as:

o they intend to make the contribution to a complying superannuation fund; and

o they are retired from work and not employed in any capacity, hence the maximum earnings as an employee condition does not apply; and

o they meet the age-related condition; and

o a valid notice will be lodged with the trustee of their superannuation fund and the trustee of their superannuation fund will acknowledge that notice; and

o the deduction to be claimed will not add to or create a loss

Detailed reasoning

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 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.

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 of the fund in which the contribution is made.

This condition is satisfied as your client intends to make the contribution to a complying superannuation fund (the Fund).

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 results 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) 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 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).

As your client has retired from work and is not employed in any capacity they will not derive any income from an employer in the 2010-11 income year. Consequently, section 290-160 of the ITAA 1997 does not apply in this instance.

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.

Your client meets the age-related condition.

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 you lodge your 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, you 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:

o you are a member of the fund or the holder of the retirement savings account (RSA);

o 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);

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

· before the notice is given:

o a contributions splitting application has not been made in relation to the contribution; and;

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

This condition is satisfied as a valid notice under section 290-170 of the ITAA 1997 will be lodged with the trustee of the Fund and the trustee of the Fund will acknowledge that notice.

Deduction limits:

A person can claim a full deduction for the amount of the contribution made.

However, the allowable deduction is limited under subsection 26-55(2) of the ITAA 1997 to the amount of assessable income remaining after subtracting all other deductions (excluding previous years tax losses and any deductions for farm management losses) from a taxpayers assessable income. Thus, a deduction for personal superannuation contributions cannot add to or create a loss.

This condition is satisfied as the deduction to be claimed under section 290-150 of the ITAA 1997 will not add to or create a loss.

Contribution limits:

Concessional contributions made to superannuation funds in the 2010-11 income year are subject to an annual cap of $25,000. Concessional contributions include employer contributions (including contributions made under a salary sacrifice arrangement) and personal contributions claimed as a tax deduction by a person.

A person will be taxed on concessional contributions over the $25,000 cap at a rate of 31.5%. The superannuation fund can be asked to release money to pay this excess contributions tax.

Transitional concessional contributions cap:

Between 1 July 2007 and 30 June 2012, a transitional concessional contributions cap will apply. The annual cap is $50,000 in the 2010-11 income year for people aged 50 or over (subsection 292-20(2) of the Income Tax (Transitional Provisions) Act 1997).

Conclusion:

In this case, as all conditions have been satisfied, your client is entitled to claim a deduction under section 290-150 of the ITAA 1997 for the personal superannuation contributions to be made in the 2010-11 income year.

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