1012811226714 | Legal database

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Edited version of your written advice

Authorisation Number: 1012811226714

Ruling

Subject: Deductibility of personal superannuation contributions

Question

Will the taxpayer be entitled to claim a deduction under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) for personal superannuation contributions in the 20XX-XX income year?

Answer

No.

This ruling applies for the following period:

Income year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The taxpayer operated as a sole trader during the 20XX-XX income year.

During the latter half of the 20XX-XX income year, the taxpayer became a Statutory Office Holder.

As a result of this position, the taxpayer will not meet the 10% test in respect of the 20XX-XX income year.

The taxpayer intends to make a personal superannuation contribution in the 20XX-XX 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 subsection 290-160(1)

Income Tax Assessment Act 1997 subsection 290-160(2)

Income Tax Assessment Act 1997 section 290-165

Income Tax Assessment Act 1997 section 290-170

Superannuation Guarantee (Administration) Act 1992 (SGAA)

Reasons for decision

Summary

The taxpayer will not be entitled to claim a deduction for any personal superannuation contributions they intend to make in the 20XX-XX income year because they do not satisfy the maximum earnings condition under section 290-160 of the ITAA 1997.

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 ITAA 1997. However, the conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997 must also be satisfied for the person to claim the deduction.

Maximum earnings as an employee condition

Subsection 290-160(1) of the ITAA 1997 states:

This section applies if:

(a) in the income year in which you make the contribution, you engage in any of these activities:

(i) holding an office or appointment;

(ii) performing functions or duties;

(iii) engaging in work;

(iv) doing acts or things; and

(b) 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 had not been enacted).

The requirements above apply to the taxpayer. The taxpayers role as a Statutory Office Holder results in the taxpayer being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA). Subsection 12(9) of the SGAA states:

A person who:

(a) holds, or performs the duties of, an appoint, office or position under the Constitution or under a law of the Commonwealth, of a State or of a Territrory; or

(b) is otherwise in the service of the Commonwealth, of a State or of a Territory (including service as a member of the Defence Force or as a member of a police force);

is an employee of the Commonwealth, the State or the Territory, as the case requires. However, this rule does not apply to a person in the capacity of the holder of an office as a member of a local government council.

If the requirements outlined under subsection 290-160(1) of the ITAA 1997 applies, a taxpayer must satisfy the maximum earnings test to claim a deduction. The maximum earnings test is outlined under subsection 290-160(2) of the ITAA 1997 which states:

To deduct the contribution, less than 10% of the total of the following must be attributable to the activities:

(a) your assessable income for the income year;

(b) your reportable fringe benefits total for the income year;

(c) the total of your reportable employer superannuation contributions for the income year. [emphasis added]

The Taxpayer did not earn any assessable income that could be attributed to employment activities.

However, the maximum earnings test requires that less than 10% of the taxpayer's assessable income, reportable fringe benefits and reportable employer superannuation contributions for the entire income year be attributable to employment activities.

Therefore, as the facts indicate that the conditions contained in section 290-160 of the ITAA 1997 will not be met; the other conditions contained in sections 290-155, 290-165 and 290-170 of the ITAA 1997 will not be considered.

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