Edited version of private ruling

Authorisation Number: 1011721513369

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Ruling

Subject: deduction for personal superannuation contributions

Questions

1. Can you claim a deduction in respect of personal superannuation contributions made to a complying superannuation fund in the 2010-11 income year under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer: Yes.

2. Is there a maximum amount for which a deduction can be claimed?

Answer: No.

This ruling applies for the following period

Year ending 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

You are over 50 years of age and under age 75.

You retired over five years ago.

You draw a retirement pension from a superannuation scheme.

Your only income in the 2010-11 income year will be the pension and investment income.

You state that you will not be engaged in any activity that will result in you being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA) in the 2010-11 income year.

You state that you intend to make a contribution in the 2010-11 income year to a complying superannuation fund.

You state that you do not have any employer superannuation contributions in the 2010-11 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 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 confirm that the deduction claimed under section 290-150 of the ITAA 1997 will not add to or create a loss.

Summary

As all the required conditions have been satisfied, you are entitled to claim a deduction for the personal superannuation contributions made to a complying superannuation fund in the 2010-11 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 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 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 intend to make a contribution to a complying superannuation fund. Therefore, this requirement is 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 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).

You advise that in the 2010-11 income year you have not worked as, nor do you intend to work as, an employee. 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 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); and;

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); and;

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.

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 losses) from a taxpayers assessable income. Thus a deduction for personal superannuation contributions cannot add to or create a loss.

You confirm that the deduction 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 are subject to an annual cap. For the 2010-11 income year the concessional contributions cap is $25,000. The age based limits on deductions that existed for these contributions no longer apply.

The concessional contributions cap is indexed to upward movements of average weekly ordinary time earnings (AWOTE) in $5,000 increments (subsection 292-20(2) of the ITAA 1997).

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 cap at a rate of 31.5% (section 292-15 of the ITAA 1997 and sections 4 and 5 of the Superannuation (Excess Concessional Contributions Tax) Act 2007). The superannuation fund can be asked to release money to pay this excess contributions tax.

Between 1 July 2007 and 30 June 2012, a transitional concessional contributions cap will apply for people aged 50 or over. For the 2009-10 to the 2011-12 income years, as a result of changes announced in the May 2009 Budget, the annual cap is $50,000 (subsection 292-20(2) of the Income Tax (Transitional Provisions) Act 1997).

If a person has more than one fund, all concessional contributions made to all their funds are added together and count towards the cap.

Amounts in excess of the concessional contributions cap are also counted towards the non-concessional contributions cap.

Conclusion:

As all the required conditions have been satisfied, you are entitled to claim a deduction under section 290-150 of the ITAA 1997 for the personal superannuation contributions made to a complying superannuation fund in the 2010-11 income year.

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