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Ruling

Subject: Deduction for personal superannuation contributions

Questions

Can your client claim a deduction in respect of personal superannuation contributions made to a complying superannuation fund in the 2011-12 income year under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Is there a limit on the amount that can be claimed as a deduction under section 290-150 of the ITAA 1997?

Advice/Answers

Yes.

No.

This ruling applies for the following period

Year ending 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts

Your client will make personal superannuation contributions to a complying superannuation fund.

Your client will be under age 65 when the contributions are made

You state that your client satisfies the maximum earnings as an employee condition.

The contribution will be made in order to obtain superannuation benefits for your client or for your client's dependants in the event of your death.

Your client will lodge a valid notice with the trustee of the Fund and receive an acknowledgment of that notice.

The proposed deduction for personal superannuation contributions will 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.

Superannuation Guarantee (Administration) Act 1992 Subsection 12(11).

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

Reasons for decision

Summary

As all conditions have been satisfied your client will be entitled to claim a deduction for the personal superannuation contribution made to the complying superannuation fund in the 2011-12 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 of the ITAA 1997 must 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 that personal superannuation contributions will be made 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:

· in the income year in which you make the contribution, you engage in any of these activities:

· holding an office or appointment;

· performing functions or appointment;

· engaging in work;

· doing acts or things; and

· 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 state that your client satisfies the maximum earnings as an employee condition. Consequently, section 290-160 of the ITAA 1997 has been satisfied for the 2011-12 income year.

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 will be under age 65 when the contributions are made, therefore, this requirement is satisfied.

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 has not rejected the application.

This condition is satisfied as your client will lodge a valid notice with the trustee of the Fund and received an acknowledgment of that notice.

Conclusion:

As all conditions under section 290-150 of the ITAA 1997 have been satisfied your client is entitled to claim a deduction for the personal superannuation contribution made to the complying superannuation fund in the 2011-12 income year.

There are limits on the amounts that can be contributed into your superannuation each financial year before you have to pay extra tax. These limits are called superannuation contributions caps. If more is contributed to your superannuation than the cap amount, you may have to pay extra tax.

How much extra tax you pay once you exceed a cap depends on the type of contributions. There are two types of contributions:

· concessional, and

· non-concessional.

Contributions made to a constitutionally protected fund are specifically excluded from being concessional and non-concessional contributions.

Please note the untaxed plan cap is the maximum untaxed superannuation benefit received as a lump sum from a superannuation fund which will be subject to concessional tax rates and does not apply to contributions received by a superannuation fund.

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