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Edited version of administratively binding advice

Authorisation Number: 1012478585541

Advice

Subject: Concessional contributions

Question

Is a contribution made in one financial year but categorised as a concessional contribution for the member in the following financial year, counted towards the concessional contributions cap in the latter financial year?

Answer

No.

This advice applies for the following period:

Year ending 30 June 2012.

The scheme commences on

1 July 2011

Relevant facts and circumstances

You are a member of a self managed superannuation fund (the Fund).

You and your partner are the only members and trustees of the Fund.

You are aged under 65 and your partner is aged 65.

You are each in receipt of a retirement pension from a different superannuation fund.

In the relevant year you sold your rental property to purchase your home.

Your accountant confirmed there would be a capital gains tax (CGT) liability for the subsequent financial year.

You contributed all available funds (a total of $X) to your Fund before the end of the subsequent financial year.

The available funds were paid to the Fund's SMSF bank account by electronic transfer.

You informed your accountant, financial adviser and SMSF administrator of your intention to claim the maximum allowable concessional contribution cap amount for the subsequent financial year as a deduction.

You stated this was in order to offset your CGT liability, leaving the balance to be accounted as a non-concessional contribution.

Your financial adviser believed you could apply ATO Interpretative Decision Superannuation Excess Contributions Tax : concessional contributions - allocation of contributions (ATO ID 2012/16) for the Fund to:

You now intend to claim the total of $Y as a tax deduction in the subsequent year in respect of the total contributions $X made in the subsequent financial 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 290-170

Income Tax Assessment Act 1997 Subsection 292-25(2)

Income Tax Assessment Act 1997 Subsection 292-25(3)

Income Tax Assessment Regulations 1997 regulation 292-25.01(2)

Income Tax Assessment Regulations 1997 regulation 292-25.01(4)

Superannuation Industry (Supervision) Regulations 1994 Subregulation 7.08(2)

Superannuation (Excess Concessional Contributions Tax) Act 2007

Reasons for decision

Summary

If you claim the amount of $Y as an income tax deduction in the subsequent financial year, the full amount will be treated as a concessional contribution in the subsequent financial year. This is because the contribution was made for you in that year and allocated to your account in that year.

The fact that yourself, and the Fund categorised some part of the contribution as a concessional contribution after the end of the financial year does not alter when the contribution was made which was in the subsequent financial year.

Detailed reasoning

Section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you can deduct a contribution you make to a superannuation fund for the purpose of providing superannuation benefits for yourself. This is subject to meeting all the conditions for claiming a deduction including giving the fund notice of your intent to claim the deduction and the fund's acknowledgment's of the notice.

Certain contributions are included as assessable income of a fund including those made on the contributor's own behalf for which the contributor is entitled to a deduction (section 295-155 of the ITAA 1997).

You are liable to pay excess concessional contributions tax imposed by the Superannuation (Excess Concessional Contributions Tax) Act 2007 if you have excess concessional contributions for a financial year.

For the 2011-12 financial year, your concessional contributions cap is $50 000 if you are aged 50 or more on the last day of the financial year. For the 2012-13 financial year, your concessional contributions cap is $25 000.

Your concessional contributions for a financial year is set out in section 292-25 of the ITAA 1997 and includes a contribution to a fund for which the contributor is entitled to claim a deduction and consequently included as assessable income of the fund.

A contribution to a fund is also a concessional contribution if it is allocated by the fund for the year in accordance with the conditions specified in the income tax regulations (subsection 292-25(3) of the ITAA 1997). The relevant regulation is 292-25.01 of the Income Tax Assessment Regulations 1997 (ITAR 1997).

In ATOID 2012/16, the issue under consideration was whether, in calculating a person's concessional contributions under section 292-25 of the ITAA 1997 for a financial year, a contribution is counted as a concessional contribution in the financial year in which the contribution is made where the fund allocated that contribution to the member with effect in the next financial year.

The member made a personal contribution during a financial year and the fund trustees immediately allocated this contribution to the member.

The member then made a further contribution during the month of June (at the end of the same financial year) and the fund trustees applied the amount to an unallocated contributions account that had been established in accordance with the governing rules of the fund.

At the beginning of July of the next financial year, the fund trustees allocated the amount credited to the unallocated contributions account in the previous month to the member with effect from that date in July. That is, it was not allocated with effect from the date the contribution was received by the fund but in the next financial year.

The Commissioner referred to the Explanatory Statement to Income Tax Assessment Amendment Regulations 2007 (No.3) which introduced regulation 292-25.01 of the ITAR where it stated:

The Commissioner viewed the above statement showed that the further contribution made by the member is intended to be included in concessional contributions at the time the allocation of the contribution has effect and not when the contribution was made (which was different).

A contribution is made 'in respect of you' when it is made for the purpose of providing superannuation benefits for you.

In Taxation Ruling Income tax: superannuation contributions TR 2010/1, it is stated that in the superannuation context, a contribution is anything of value that increases the capital of a superannuation fund provided by a person whose purpose is to benefit one or more particular members of the fund or all of the members in general.

The Commissioner sets out his view on how a person's purpose is determined when a contribution is made to a fund for their benefit.

Paragraphs 6 and 7 of TR 2010 are as follows:

A superannuation fund's capital is most commonly increased by transferring funds to the superannuation provider and as a general rule, the contribution will be made when the funds are received by the superannuation provider including when a contribution is made by way of an electronic transfer of funds to the superannuation provider. A contribution is made when the funds are credited to the superannuation provider's account.

Applying the above to the facts of your case

It is considered that the whole of the amount that was contributed to the Fund was 'in respect of you' when you made the contribution to the Fund during the subsequent financial year) as it was your intention to claim the maximum allowable concessional contributions for the subsequent financial year as a deduction in order to offset your CGT liability leaving the balance to be accounted for as a non-concessional contribution.

The contribution was banked into the Fund's SMSF bank account and not held in a reserve as referred to in ATOID 2012/16.

The facts in ATO ID 2012/16 can clearly be distinguished from the facts in your case.

What you are actually doing is categorising or labelling the contribution after the amount has been received by the Fund. This is not unusual and the income tax provisions under section 290-170 of the ITAA 1997 supports this by the time limits for giving a notice of intent to claim a deduction to the fund trustee advising of the intention to claim a deduction for a contribution.

A taxpayer generally has until 30 June of the following income tax year to notify the fund of their intention to claim a deduction which will then categorise the contribution as a concessional contribution. It does not alter the fact that the contribution has been made in respect of the member on the day it increases the capital of the fund. In your case this was when the Fund's bank account received the $X for your benefit.

It can also be concluded the contribution received by the Fund was not in respect of another member of the Fund as you stated your intention to claim the maximum concessional contribution cap amount allowable was in order to offset your CGT liability, leaving the balance to be accounted as a non-concessional contribution.

Subsection 292-25(2) of the ITAA 1997 specifies a contribution is a concessional contribution if it is made in the financial year to a complying superannuation plan 'in respect of you' and it is included in the assessable income of the superannuation provider.

Therefore, if you claim the amount of $Y as an income tax deduction in the subsequent financial year, the full amount of $Y will be treated as a concessional contribution in the subsequent financial year as it will be covered as a concessional contribution under subsection 292-25(2) of the ITAA 1997.

This is because the contribution was made for you in that year and allocated to your account in that year and not to a reserve. The fact that yourself, and the Fund categorised some part of the contribution as a concessional contribution after the end of the financial year does not alter when the contribution was made which was in the subsequent financial year.

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