Edited version of your private ruling

Authorisation Number: 1012516761761

Ruling

Subject: Timing of superannuation contributions

Question 1

Did the fund members make contributions in the 2012-13 income year?

Answer:

No.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commences on

1 July 2012

Relevant facts and circumstances

For the 2012-13 income year the members of a superannuation fund (the Fund) decided to make personal self employed superannuation contributions to the Fund.

One of the members, Member A, had scheduled the members' contributions to be made on a specified date (the Scheduled Date).

The contributions, as shown in 'online screen shots' provided, were made as an electronic transfer from the Members' Online Account (the Members' Account) to the Fund's Online Account (the Fund Account) which were held with the same financial institution (the Financial Institution).

The screen shots also show:

(a) the contribution was a one off funds transfer made between the Members' Account and the Fund Account on the Scheduled Date;

(b) the status as paid; and

(c) a lodgement number.

A copy of the Fund Account shows the contribution as being deposited to that account in the 2013-14 income year and it was transfer from the Members' Account.

The Terms and conditions issued by the Financial Institution, which relate to the accounts and internet banking services used by the Members and the Fund in this case, show in respect of the processing of withdrawals and deposits:

· Deposits and other credits are not be treated as made until the date on which those deposits or other credits are applied to the account in the ordinary course of business.

· Any withdrawals, deposits or transfers made on an account using an ATM, EFTPOS, Phone Banking, Internet Banking etc are processed to a client's account on the same day, provided they are made before various times on business and banking business days.

· Any transaction made after the cut-off times may be processed on the following business day or Banking Business Day. A Banking Business Day is a day on which banks in Melbourne or Sydney are able to effect settlement through the Reserve Bank of Australia.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 290-C

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 Section 290-170

Income Tax Assessment Act 1997 Subdivision 295-C

Income Tax Assessment Act 1997 Section 295-190

Income Tax Assessment Act 1997 Subsection 295-190(1)

Income Tax Assessment Act 1997 Subsection 295-190(2)

Reasons for decision

Summary

The personal self employed superannuation contributions made by the Fund's members are not contributions made to the Fund for the 2012-13 income year as the Fund received the contributions in the 2013-14 income year.

Detailed reasoning

Certain contributions received by a complying superannuation fund are included in its assessable income and are usually taxed as part of the fund's income. One type of 'assessable contribution', which appears relevant in your client's (the Fund's) case, are personal contributions which a member notifies their fund's trustee that they intend to claim as a tax deduction under section 290-170 of the Income Tax Assessment Act 1997 (ITAA 1997)

Further, in relation to this case, it should be noted that subsection 295-190(2) of the ITAA 1997 states:

A contribution …. is included in the income year in which it is received if the notice is received by the superannuation provider by the day the superannuation provider by the day the provider lodges its income tax return for that income year. (emphasis added)

In view of the above, the issue that must be determined, which is the basis for this ruling, is when were the Members' personal superannuation contributions received by their superannuation fund (the Fund).

In Taxation Ruling TR 2010/1 entitled 'Income tax: superannuation contributions' (TR 2010/1) the Commissioner of Taxation's views as to the ordinary meaning of the word 'contribution' are explained in so far as the term 'contributions' is used in relation to superannuation funds, approved deposit funds or retirement savings accounts in the ITAA 1997.

In TR 2010/1 the Commissioner also provides in paragraphs 181 to 187 his view on when a superannuation contribution is made as follows:

When a superannuation contribution is made

181. The time at which a contribution is made will determine the period for which the person making the contribution may be eligible to claim a deduction. Subsections 290-60(3) and 290-150(3) prescribe that a contribution made in an income year is deductible in that income year. When a contribution is made is also relevant to the operation of the excess contributions taxes.48 Further, a contribution that is included in the assessable income of a superannuation fund is normally included in the income year in which it is received.49

General rule - a contribution is made when received by the fund

182. A superannuation contribution is made when the capital of the fund is increased. As explained in paragraphs 183 to 210 of this Ruling, the contribution may be made when an amount is received, or ownership of an asset is obtained or the fund otherwise obtains the benefit of an amount. (emphasis added)

Contributions of funds

183. A contribution of funds as cash or an electronic funds transfer, is made when the amount is received by the superannuation provider or credited to the relevant account. (emphasis added)

184. It has been suggested that a contribution made by electronic funds transfer may occur as soon as the contributor has done everything necessary to effect a payment. The Commissioner does not accept that is sufficient to increase the capital of the fund.

185. Electronic payment systems operate through contractual arrangements between the:

· payer and payer's financial institution;

· payer's financial institution and payee's financial institution; and

· payee's financial institution and payee.

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.50 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.

187. A superannuation provider's account statement would normally provide the best evidence as to when a contribution is received. However, in limited circumstances, other evidence may be used to determine when a contribution is made. For example, a transfer of funds between the linked accounts of a member of a self-managed superannuation fund and the fund held at the same financial institution may result in a contemporaneous debit and credit to the respective accounts with the funds being immediately available for use of the self-managed superannuation fund. When such a transfer occurs on a weekend, it is common for bank statements to show the transaction occurring on the next business day. Evidence, such as a computer print-out recording the receipt of the amount into an account of the superannuation provider, may be used to establish the timing of the contribution. (emphasis added)

In your client's case it is noted that the Members did undertake measures to make contributions prior to 30 June 2013. As shown by the screen shots and other facts provided, Member A scheduled the contribution for the Members to be electronically transferred on to the Fund's Account.

Despite the screen shots, and the fact that the contribution was a transfer of monies between accounts held with the same financial institution, the facts also show that:

(a) the contribution was not recorded as a deposit in the Fund's Account on the Scheduled Date but on a date in the 2013-14 income year; and

(b) the Scheduled Date fell on a non business day.

Though the screen shots indicate the contributions payment was made and transferred to the Fund Account on the Scheduled Date, it should be noted that the contributions being recorded as a deposit in the Fund's Account on date in the 2013-14 income year was in accordance with the Terms and conditions issued by the Financial Institution which showed:

· Deposits and other credits are not be treated as made until the date on which those deposits or other credits are applied to the account in the ordinary course of business.

· Any withdrawals, deposits or transfers made on an account using an ATM, EFTPOS, Phone Banking, Internet Banking etc are processed to a client's account on the same day, provided they are made before various times on business and banking business days.

· Any transaction made after the cut-off times may be processed on the following business day or Banking Business Day. A Banking Business Day is a day on which banks in Melbourne or Sydney are able to effect settlement through the Reserve Bank of Australia.

As the Members had scheduled their contributions payment to be made on the Scheduled Date, which was a non business day, it is evident that in accordance with the Terms and conditions shown above that:

(a) the payment would be processed on the following business day, in this case, a date which occurred in the 2013-14 income year; and

(b) the deposit of the contributions to the Fund Account would not be treated as made until applied to that account, which was a date in the 2013-14 income year, the date when the Financial Institution's processing of the transfer had been completed.

Further it should also be noted that, in view of the Terms and conditions and the deposit being made to the Fund Account on a date in the 2013-14 income year , that:

(a) there was no contemporaneous debit and credit between the respective accounts for the funds being immediately available for use of the Fund on the Scheduled Date; and

(b) the Fund's capital did not increase by way of the contributions nor was the Fund able to use those contributions until the date it received them in the 2013-14 income year.

Accordingly, in view of the above, the Commissioner considers the contributions made in relation to Members were not received by the Fund in 2012-13 income year but in the 2013-14 income year.

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