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Edited version of your private ruling
Authorisation Number: 1012574546422
Ruling
Subject: Timing of concessional contributions
Question
If a contribution is received by the trustee of a superannuation fund before 30 June 2013 but not banked until after 30 June 2013, can the contribution be recorded as a contribution for the 2012-13 income year?
Advice/Answer
No.
This review applies for the following period
Year ended 30 June 2013
The scheme commences on
1 July 2012
Relevant facts and circumstances
You are a member of a fund (the Fund).
You are a director of the corporate trustee of the Fund.
You live and work predominantly from home with visits to your clients. The nearest banking available to you is a considerable distance away in another town.
In late June 20XX, you travelled and had intended to make personal contributions, by cheque, to your account with the Fund. However, due to work commitments you were unable to deposit the cheque to the Fund's bank account at this time.
Driving home your vehicle had mechanical problems. As your vehicle was under warranty you contacted your vehicle's dealer who advised not to drive the vehicle unnecessarily and booked your vehicle in for inspection the following week.
Once the vehicle had been inspected you could have deposited the cheque, however to do so would have required travelling a lengthy distance and disruption to your work commitments and time restraints.
You have advised that there is no public transport near where you live and that the closest limited public services that operate in another town would have involved a large cost and a lengthy distance for the return trip.
You were unable to do internet banking as your computer had failed during this time. A new computer was purchased late in 2012-13 income year however the computer was not set up for use until 2013-14 income year after having loaded the software and registering the anti-virus software.
Due to the difficult and demanding week with work and related travel commitments, comprised by vehicle and computer limitations you were unable to present the cheque. The cheque was deposited at a branch of the Fund's bank account in the 2013-14 income year.
You are mindful of your obligations as Trustee of the Fund and acted to deposit the cheque at the earliest reasonable time.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 295-190
Summary of decision
The personal contributions are considered to be made to the Fund in the 2013-14 income year when the contributions were received.
Detailed reasoning
Year of receipt of the contribution
In respect of when personal superannuation contributions are made, the relevant year of income is the year in which the contribution is received.
In the High Court decision Tilley v. The Official Receiver in Bankruptcy [1961] ALR 83; (1960) 103 CLR 529; 20 ABC 108; (1960) 34 ALJR 361 (Tilley), Justice Kitto, in a general observation, said:
There can be no doubt that the acceptance of a payment by cheque implies, if there be nothing to the contrary, an agreement that it shall be considered as payment, subject to the condition subsequent that if the cheque be dishonoured it shall no longer be so considered: Mackenzie v. Rees (1941) 65 CLR 1 at p 15.
Chief Justice Dixon, in the same case, expressed a similar view. Therefore, Tilley provides the authority for the proposition that a fund member has made a contribution by cheque when the trustee receives that cheque.
In Taxation Ruling TR 2010/1 the Commissioner of Taxation has provided his view on when a contribution is made.
At paragraph 183 of TR 2010/1 it states:
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.
Furthermore, at paragraphs 190 to 192 of TR 2010/1 it states:
190. In the case of a personal cheque or a promissory note that is contributed by the maker, the Commissioner will treat the contribution as being made when the cheque or note is received by the superannuation provider only if the superannuation provider promptly presents the cheque or note for payment and the cheque or note is honoured with cash (or its electronic equivalent). [emphasis added].
191. In circumstances where such a personal cheque or promissory note is not promptly dealt with, the Commissioner will treat a contribution as having been made only once the superannuation provider has obtained payment in cash (or its electronic equivalent).
192. Presentation of such a personal cheque or demand for payment of such a promissory note will be accepted as prompt if it occurs within a few business days consistent with prudent business practice. Subject to extenuating circumstances, the Commissioner expects a trustee to obtain payment on any cheque or promissory note as soon as possible as such behaviour is consistent with the covenant in paragraph 52(2)(b) of the SISA. Under that covenant, the trustee is required to exercise the same degree of care, skill and diligence as an ordinary prudent person would exercise in dealing with the property of another to whom the trustee felt morally bound to provide.
Therefore, payment of a personal cheque or related party promissory note will be taken to have been made promptly if the payment is made within a few business days.
In the present case, you live and work predominantly from home with visits to your clients. The nearest banking available to you is a considerable distance away in another town.
In late June 2013, you travelled for work and had intended to make personal contributions by cheque, to your account with the fund (the Fund). However, due to work commitments you were unable to deposit the cheque to the Fund's bank account.
Driving home your vehicle had mechanical problems. As your vehicle was under warranty you contacted your vehicle's dealer who advised not to drive the vehicle unnecessarily and booked your vehicle in for inspection the following week.
Once the vehicle had been inspected you could have deposited the cheque, however to do so would have required travelling a lengthy distance and disruption to your work commitments.
It is clear from the foregoing that the amount was not paid to the Fund until the 2013-14 income year, that is, when the amount was actually made to the bank to be credited to the Fund's bank account.
As you are both the contributing member (writer of the cheque) and trustee of the Fund (banker of the cheque) it is expected that having the cheque in the fund's account and cleared by 30 June 2013 would be of the utmost importance in carrying out your duties as a trustee.
In view of the above, it is considered that you have not acted promptly (as envisaged by paragraph 190 of TR 2010/1) in dealing with the cheque and it follows that the Fund will only be able to credit your account with the contribution in the 2013-14 income year, (that is, in the year in which the contribution was actually received).
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