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Edited version of private ruling
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Ruling
Subject: Personal Superannuation Deductions
Question
Can a superannuation contribution be claimed in the income year in which it was made when the fund does not receive it until the subsequent financial year due to a banking error?
Advice/Answers
No.
This ruling applies for the following period
Year ending 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts
Your client retired during the 2008-09 income year.
Your client did not receive any wages or compulsory employer contributions during the 2009-10 income year.
During the 2009-10 income year, your client received interest income and a capital gain from the sale of his property.
The property was sold and settled towards the end of the 2010 year.
Your client provided specific instructions to his bank to direct a portion of the proceeds on settlement to his superannuation account.
Due to an internal miscommunication, the amount did not transfer into your client's superannuation account until after the commencement of the 2011 year.
Assumptions
All other requirements for claiming a personal deduction under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) have been met.
Summary of decision
Your client is not able to claim a deduction on his personal superannuation contribution for the 2009-10 income year as he has not made a contribution within the legislative required timeframe.
Detailed reasoning
The operative provisions dealing with the deductibility for personal contributions made to a superannuation fund are contained in subdivision 290-C of the Income Tax Assessment Act 1997 (ITAA 1997).
Under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997), a person can claim a deduction for personal contributions made to a superannuation fund for the purpose of providing superannuation benefits for themselves if all the applicable conditions have been met.
On the basis of the facts provided and assumptions made, it is accepted that your client had the intention to make a contribution to a complying fund. It is also accepted that the complying superannuation fund can accept such contributions.
Subsection 290-150(3) of the ITAA 1997 provides that a deduction can only be claimed in respect of the year of income in which the contribution is made.
Taxation Ruling 2010/1 Income tax: superannuation contributions (TR 2010/1) which deals with the issue of deductions for contributions to superannuation funds by individuals makes the following comment at paragraph 183 as to when a payment is made to a superannuation fund:
A contribution of funds as cash or an electronic fund transfer, is made when the amount is received by the superannuation provider or credited to the relevant account
Furthermore, in paragraph 186:
When a financial institution agrees to accept a payment instruction it notifies the receiving institution of the details of the payment. In Australia there are several different clearing systems for the transferring of information and netting of amounts to be transferred between institutions. The clearing rules of these systems bind the financial institutions but not the customers. Most small payments between institutions are not processed in real time but are subject to deferred net settlement which occurs overnight. As such, it is not until an amount is credited to a bank account of the superannuation provider that a contribution will be taken to be made.
The above provides that a contribution is taken to have been made when the fund physically receives it.
In the present case, your client had provided specific instructions to have a portion from the settlement proceeds paid as a personal superannuation contribution into his fund on a specific date prior to the end of the 2010 year. However, due to an internal miscommunication with the fund, the amount was not transferred until after the commencement of the 2011 year.
Although your client intended to make a deductible superannuation contribution prior to the end of the 2010 year, the legislation specifically states that a deduction will only be allowable in the year of income that the fund receives the contribution. In addition, the Commissioner has no discretion to treat a contribution made in one income year as being contributed in another year. In your client's case, the date that the fund received the contribution is one which belongs to the 2010-11 income year.
Consequently, your client is eligible to claim a deduction for the superannuation contributions in the 2010-2011 income year provided that all other conditions of section 290-C of the ITAA 1997 are satisfied.
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