Edited version of your written advice

Authorisation Number: 1012843052280

Date of advice: 23 July 2015

Ruling

Subject: Personal superannuation contributions made to a constitutionally protected fund.

Questions

1. Is the Taxpayer entitled to claim a deduction under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of the personal superannuation contributions made during the 20XX-YY income year?

2. Will personal contributions made to a constitutionally protected fund for which a tax deduction is claimed count towards either the Taxpayer's concessional contributions cap or the Taxpayer's non-concessional contributions cap?

Answers

1. Yes

2. No

This ruling applies for the following period

Income year ended 30 June 20YY

The scheme commences on

1 July 20XX

Relevant facts and circumstances

The Taxpayer is a member of Fund A, a complying superannuation fund.

Fund A is a constitutionally protected fund (CPF).

Fund A is an accumulation fund that allows members to accumulate untaxed benefits and can still be concessionally taxed.

The Taxpayer is also a member of a non-constitutionally protected fund (Fund B).

The Taxpayer has been advised by Fund A that it will accept personal contributions from the Taxpayer.

The Taxpayer has confirmed that they have made a personal contribution to Fund A in the 20XX-YY income year.

The Taxpayer has confirmed that they have made a personal contribution to Fund B in the 20XX-YY income year.

The Taxpayer's stated intentions for making the contributions into superannuation is for the purpose of providing superannuation benefits for the Taxpayer or for their dependants if the Taxpayer dies before becoming entitled to the benefits.

The Taxpayer intends to provide the trustees of Funds A and B with written notices of intent to claim a deduction for the personal contributions made in the 20XX-YY income year, and accordingly expects to receive acknowledgments from Funds A and B.

The Taxpayer states the amounts intended to be claimed as a deduction in respect of the personal superannuation contributions to both Fund A and Fund B will not add to or create a loss in the 20XX-YY income year.

The Taxpayer has advised that they hold an office and that the total of assessable income and reportable fringe benefits attributed to those activities are less than 10% of the Taxpayer's total assessable income and reportable fringe benefits for the 20XX-YY income year.

For the 20XX-YY income year, the Taxpayer states that they will only earn income from other sources.

The Taxpayer states that they were not in receipt of any reportable employer superannuation contributions for the 20XX-YY income year.

The Taxpayer was under 75 years of age during the 20XX-YY income year.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 26-55(2)

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 Subparagraph 291-25(2)(c)(iii)

Income Tax Assessment Act 1997 Subparagraph 291-25(2)(c)(iv)

Income Tax Assessment Act 1997 Subsection 307-220(1)

Income Tax Assessment Act 1997 Subsection 307-220(2)

Summary

Based on the information, the Taxpayer will be able to claim deductions for their personal superannuation contributions made in the 20XX-YY income year, provided that all the conditions are satisfied.

Contributions made to a constitutionally protected fund (CPF) are neither concessional contributions nor non-concessional contributions. As such, the proposed contributions to Fund A will not count towards the Taxpayer's concessional contributions cap or their non-concessional contributions cap for the 20XX-YY income year.

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 (if applicable), 290-165 and 290-170 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).

For those persons who fall under the requirements outlined above, subsection 290-160(2) of the ITAA 1997 prescribes that a deduction for personal contributions can only be claimed where the sum of their:

n assessable income

n reportable fringe benefits total and

n reportable employer superannuation contributions

attributable to the employment activities is less than 10% of the total of that person's assessable income, reportable fringe benefits total and reportable employer superannuation contributions. This calculation is referred to as the maximum earnings test.

The facts provided in this case indicate that the amounts attributable to employment related activities which the Taxpayer received in the 20XX-YY income year are less than 10% of their total assessable income and reportable fringe benefits in that income year.

Accordingly, the Taxpayer satisfies the maximum earnings test under section 290-160 of the ITAA 1997 for the 20XX-YY income year.

Complying superannuation fund condition

The condition in section 290-155 of the ITAA 1997 requires that where the contribution is made to a superannuation fund, it must be made to a complying superannuation fund for the income year of the fund in which the contribution is made.

In this instance, the Taxpayer has made personal contributions to Fund A and Fund B. Both Funds A and B are complying superannuation funds. Therefore, the condition in section 290-155 of the ITAA 1997 is satisfied.

Age-related conditions

Relevantly, under subsection 290-165(2) of the ITAA 1997, the ability to claim a deduction ceases for contributions that are made after 28 days from the end of the month in which the person making the contribution turns 75 years of age.

The Taxpayer was under 75 years of age during the 20XX-YY income year when the contributions were made. Therefore the Taxpayer satisfies the age-related conditions for the contributions in the 20XX-YY income year.

Notice of intent to deduct conditions

According to section 290-170 of the ITAA 1997, in order to deduct a contribution, the Taxpayer is required to provide to the trustees of Fund A and Fund B a valid notice in the approved form, of her intention to claim a deduction. The notice must be given by the earlier of:

(a) the date the Taxpayer lodges their income tax return for the income year in which the contribution is made; or

(b) the end of the following income year.

The Taxpayer must also be given an acknowledgment of receipt of the notice by the trustees of Fund A and Fund B.

A notice of intent to deduct for the Taxpayer's contributions will not be valid if one or more of the following conditions in subsection 290-170(2) of the ITAA 1997 are satisfied:

(a) the notice is not in respect of the contribution;

(b) the notice includes all or part of an amount covered by a previous notice;

(c) when you gave the notice:

(i) you were not a member of the fund or the holder of the RSA;

or

(ii) the trustee or RSA provider no longer holds the contribution;

or

(i) the trustee or RSA provider has begun to pay a superannuation income stream based in whole or part on the contribution;

(d) before you gave the notice:

(i) you had made a contributions splitting application... in relation to the contribution; and

(ii) the trustee or RSA provider had not rejected the application.

In relation to the contributions in the 20XX-YY income year, provided that the Taxpayer:

(a) gives valid notices of intent to the trustees of Fund A and Fund B within the time frames previously discussed; and

(b) the trustees of Fund A and Fund B duly acknowledge those notices;

it is accepted that section 290-170 of the ITAA will be satisfied.

As the Taxpayer has already satisfied the conditions under sections 290-155, 290-160 and 290-165 of the ITAA 1997, satisfying the condition under section 290-170 will allow the Taxpayer to claim a deduction for the personal superannuation contributions made to Funds A and B in the 20XX-YY income year.

Deduction limits

The allowable deduction is limited under subsection 26-55(2) of the ITAA 1997 to the amount of assessable income remaining after subtracting all other deductions (excluding previous year's tax losses and any deductions for farm management losses) from a taxpayer's assessable income.

Thus a deduction for personal superannuation contributions cannot add to, or create, a loss.

According to the facts of this case, the deductions claimed by the Taxpayer in relation to the proposed contributions will not add to or create a loss in the 20XX-YY income year.

Contribution limits

It is noted that Fund A is a CPF. Subparagraph 291-25(2)(c)(iii) of the ITAA 1997 specifically excludes contributions made to a CPF from the definition of concessional contributions. This means that the Taxpayer's contributions to Fund A will not be concessional contributions.

In view of this, the contributions made to Fund A in the 20XX-YY income year will not count towards the Taxpayer's concessional contributions cap for the income year.

Subparagraph 292-90(2)(c)(iv) of the ITAA 1997 specifically excludes 'a contribution made to a CPF (other than a contribution included in the contributions segment of your superannuation interest in the fund)' from the definition of a non-concessional contribution.

Subsection 307-220(1) of the ITAA 1997 defines the 'contributions segment of a superannuation interest' as:

so much of the value of the interest as consists of contributions made after 30 June 2007, to the extent that they have not been and will not be included in the assessable income of the superannuation provider in relation to the superannuation plan in which the interest is held.

However, the operation of subsection 307-220(2) of the ITAA 1997 provides that for a CPF, the only contributions that would be included in the contributions segment are contributions that would be non-concessional contributions if the fund was not a CPF.

Therefore, in the Taxpayer's case, if Fund A was treated as if it was not a CPF, the contributions in the 20XX-YY income year would be included in the assessable income of Fund A and therefore would not form part of the Taxpayer's contributions segment.

Hence, the contributions segment of the Taxpayer's superannuation interest in Fund A would therefore be nil.

Since the contributions the Taxpayer made to Fund A are not part of the contributions segment of the Taxpayer's superannuation interest in Fund A, the contributions do not fall under the definition of a non-concessional contribution.

In view of this, the contributions to Fund A in the 20XX-YY income year do not count towards the Taxpayer's non-concessional contributions cap for the income year.

It is noted that Fund B is not a CPF and so the normal rules regarding contribution limits apply.

The concessional contributions cap for the 20XX-YY income year is $35,000 for taxpayers aged 49 years or over on the last day of the previous income year.

Concessional contributions include all employer superannuation contributions and any personal contributions to Fund B that are claimed as a tax deduction.

According to the facts of this case, there are no employer superannuation contributions. As such, the only concessional contributions in the 20XX-YY income year are contributions made to Fund B.

As the Taxpayer was over 49 years of age on 30 June 20XX, they are able to claim a deduction up to the concessional contributions cap of $35,000 in the 20XX-YY income year for Fund B.

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