Edited version of private ruling

Authorisation Number: 1011712334225

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Deduction for personal superannuation contributions

Question

Are you able to claim a deduction for personal superannuation contributions in the income year under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2011e

The scheme commences on:

1 July 2010

Relevant facts:

You are aged more than 60 years.

You were employed by an entity (Entity 1) for more than 30 years.

You advise Entity 1 merged with another entity (Entity 2) in Australia to be the Australian part of another entity (Entity 3).

You state that due to health problems, you were placed on the disability scheme of Entity 3.

You received a letter from the Entity 3 advising your application under their Disability Plan had been approved.

That letter advised you that your employment with Entity 3 was to cease on a date during the income year and you were to transfer to the Disability Plan of Entity 3.

From that date, you commenced receiving a benefit under the Disability Plan and your annual disability benefit will continue up to age 65 subject to you continuing to meet the requirements of the Disability Plan.

While you are eligible to receive a benefit under the Disability Plan, your membership to the superannuation plan in Entity 3 will be suspended.

Your contributions to that superannuation plan will cease and no further superannuation contributions by Entity 3 will be made on your behalf.

You provided a copy of the policy document from the entity which administers the Disability Plan on behalf of Entity 3.

Pursuant to that policy document - at age 65 you will become eligible for a retirement benefit from the superannuation plan of Entity 3.

You may elect to receive your retirement benefit in the form of a lifetime pension or you may take your benefit as a lump sum.

You intend to make a personal superannuation contribution to your self- managed superannuation fund during the income year.

You confirm that the contributions are being made for the purpose of providing superannuation benefits to you or your dependants if you die before or after becoming entitled to the benefits.

You state you wish to claim a deduction for this in the income year.

You confirm that a valid notice under section 290-170 of the ITAA 1997 will be lodged with the trustee of your superannuation fund and that the trustee of your superannuation fund will acknowledge that notice.

You confirm that the deduction claimed under section 290-150 of the ITAA 1997 will not add to or create a loss in the income year.

You confirm that Entity 3 pays no money into any superannuation plan on your behalf.

You state you are not currently employed and receive no fringe benefits.

Relevant legislative provisions

Section 290-150 of the Income Tax Assessment Act 1997

Subsection 290-150(1) of the Income Tax Assessment Act 1997

Subsection 290-150(2) of the Income Tax Assessment Act 1997

Subsection 290-150(3) of the Income Tax Assessment Act 1997

Section 290-155 of the Income Tax Assessment Act 1997

Section 290-160 of the Income Tax Assessment Act 1997

Section 290-165 of the Income Tax Assessment Act 1997

Section 290-170 of the Income Tax Assessment Act 1997

Subsection 290-170(1) of the Income Tax Assessment Act 1997

Subsection 290-170(3) of the Income Tax Assessment Act 1997

Subsection 292-20(2) of the Income Tax (Transitional Provisions) Act 1997

Section 12 of the Superannuation Guarantee (Administration) Act 1992

Subsection 12(11) of the Superannuation Guarantee (Administration) Act 1992

Subsection 357-110(1) Taxation Administration Act 1953

Reasons for decision

Summary

You will be eligible to claim a deduction for the personal superannuation contributions you make to your self-managed superannuation fund provided all of the conditions for deductibility are also met for the income year.

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,(or their dependants after their death) under section 290-150 of the 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.

In this case, you have advised you intend to make a contribution to your self-managed superannuation fund which, in the absence of evidence to the contrary, is a complying superannuation fund. Therefore, this requirement will be satisfied.

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 total for the income year

· the total of their reportable employer superannuation contributions 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).

Taxation Ruling TR 2010/1 entitled 'Income tax: superannuation contributions' sets out the Commissioner's view on contributions made to a superannuation fund, an approved deposit fund or a retirement savings account.

Part B of TR 2010/1 explains some aspects of the rules in Division 290 of the ITAA 1997 that apply if a superannuation contribution for an employee or a personal contribution is to be deducted. At paragraphs 57and 58, it states:

Deducting personal contributions

Maximum earnings test

57. Those persons who are engaged in an 'employment' activity in the income year in which they make a contribution need to meet an earnings test if they are to deduct their contribution.

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.

In your case, you ceased employment on during the 2009-10 income year and commenced to receive a benefit from the Disability Plan of Entity 3 from that time. You advise that during the 2010-11 income year you are not currently employed. 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.

You meet this 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:

· you are 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 to which you made the application has not rejected the application.

You confirm that a valid notice under section 290-170 of the ITAA 1997 will be lodged with the trustee of your superannuation fund and that the trustee of your superannuation fund will acknowledge that notice.

Deduction limits:

From 1 July 2007 the previous age based limits on deductions for personal superannuation contributions have been abolished. As a result 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 deposits) from a taxpayer's assessable income. Thus a deduction for personal superannuation contributions cannot add to or create a loss in the relevant income year the deduction is to be claimed.

You confirm that the deduction for personal superannuation contributions you intend to claim under section 290-150 of the ITAA 1997 will not add to or create a loss in the 2010-11 income year.

Contribution limits and the concessional contributions cap:

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.

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

As you are aged more than 60 years at the end of the income year, the transitional concessional contributions cap of $50,000 will apply to you in respect of the relevant income years.

Conclusion:

Provided all of the conditions for deductibility under section 290-150 of the ITAA 1997 have been satisfied in relation to the income year, you are entitled to claim a deduction for the personal superannuation contributions made to a complying superannuation fund in the relevant income year.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).