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Edited version of your private ruling
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Ruling
Subject: Deduction for personal superannuation contributions
Question
Does the maximum earnings as an employee condition in section 290-160 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to your client in the 2011-12 income year?
Advice/Answer
No.
This ruling applies for the following period
Year ending 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
Your client sustained an injury in the 2008-09 income year while at work.
Since the 2008-09 income year your client has not returned to work, has not been able to undertake employment of any kind and is in receipt of workers compensation payments.
Your client was not at any time engaged in employment activities during the 2011-12 income year.
Relevant legislative provisions
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.
Reasons for decision
Summary
As your client was not at any time engaged in employment activities during the 2011-12 income year the maximum earnings as an employee condition does not apply to your client for the 2011-12 income year.
Your client may claim a deduction for personal superannuation contributions in the 2011-12 income year provided that all other conditions are met.
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.
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).
In regards to deducting personal contributions and maximum earnings test Taxation Ruling TR 2010/1 entitled Income tax: superannuation contributions (TR 20101) states at paragraph 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.
Your client sustained an injury in the relevant income year while at work. Since the relevant income year your client has not returned to work, has not been able to undertake employment of any kind and is in receipt of workers compensation payments. Further, your client was not at any time engaged in employment activities during the subsequent income year.
Consequently, section 290-160 of the ITAA 1997 does not apply to your client for the 2011-12 income year.
Your client may claim a deduction for personal superannuation contributions in the 2011-12 income year provided that all other conditions are met which includes:
· Complying superannuation fund condition;
· Age-related conditions; and
· Notice of intent to deduct conditions.
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