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Edited version of your written advice
Authorisation Number: 1012851627435
Date of advice: 30 July 2015
Ruling
Subject: Deduction for personal superannuation contributions
Question
Can your client claim a deduction in respect of personal superannuation contributions made to a complying superannuation fund in the 2014-15 income year under section 290-150 of the Income Tax Assessment Act 1997?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2015
The scheme commenced on
1 July 2014
Relevant facts and circumstances
Your client is a member of a superannuation fund (the Fund).
Your client made a personal contribution to the Fund in the 2014-15 income year. Your client then transferred a part of that contribution from their superannuation account to another account within the Fund in order to commence a pension.
Your client now intends to claim a deduction for the personal contribution. The deduction to be claimed is an amount which is less than your client's contribution to the Fund minus the amount transferred to commence a pension.
The Fund has advised that as the pension has commenced, your client cannot then claim a tax deduction for those funds transferred.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 290-150
Income Tax Assessment Act 1997 Section 290-170
Reasons for decision
Summary
Your client is not entitled to claim a deduction for the personal superannuation contribution made to the Fund in the 2014-15 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, 290-165 and 290-170 of the ITAA 1997 must also be satisfied for the person to claim the deduction.
Notice of intent to deduct conditions:
Section 290-170 of the ITAA 1997 requires a person to provide a valid notice of their intention to claim the deduction to the trustee of their superannuation fund.
Subsection 290-170(2) of the ITAA 1997 deals with the validity of notices and states:
The notice is not valid if at least one of these conditions is satisfied:
(a) the notice is not in respect of the contribution;
(b) the notice includes all or a 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
(iii) 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 (within the meaning given by the regulations) in relation to the contribution; and
the trustee or RSA provider to which you made the application had not rejected the application.
In regard to the notice of intention to claim a deduction Taxation Ruling TR 2010/1 entitled 'Income tax: superannuation contributions' (TR 2010/1) states at paragraph 69:
69. A notice is not valid in certain circumstances, including a notice given, when:
• the person is no longer a member of the fund (for example, because the person's benefits have been paid to them or they have rolled over their benefits in full to another fund);
• the superannuation provider no longer holds the contribution (for example, the trustee may no longer hold a contribution where a person has been paid a lump sum superannuation benefit or had part of their benefit rolled over to another superannuation fund); or
• the superannuation provider has commenced to pay an income stream based in whole or part on the contribution.
TR 2010/1 explains the validity of a notice of intention to claim a deduction where a superannuation income stream has commenced based in whole or part on the contribution. Paragraphs 272 to 274 of TR 2010/1 state:
272. It is the Commissioner's view that any superannuation benefit paid from a superannuation interest may affect the validity of a notice of intention to deduct a contribution. In particular, the Commissioner takes the view that any superannuation income stream commenced from a superannuation interest is based 'in whole or in part on' a contribution made to that superannuation interest. This is so regardless of whether the value of the superannuation income stream is less than the value of the interest as reduced by the relevant year's contributions. Further, any superannuation lump sum paid from the interest reduces the contributions held by the superannuation provider.
273. This approach is taken because it is consistent with the integrity of the rules that determine how superannuation benefits are taxed. Subsection 307-125(1) states that the tax free and taxable components of a superannuation benefit are worked out by first determining the proportions of the value of the superannuation interest that the components represent and then applying those proportions to the benefit. Paragraph 307-125(3)(a) states that, in the case of a superannuation income stream, the value of the superannuation interest and the amount of each of its components is worked out when the income stream commences. Paragraph 307-125(3)(b) states that, in the case of a superannuation lump sum, the value of the superannuation interest and the amount of each of its components is worked out just before the benefit is paid.
274. Therefore, a deduction notice covering all of the contributions made in a particular year will be invalid if it is given by a member after any superannuation benefit has been paid to the member because the components of the benefit will have been worked out on the basis that the current year's contribution was not deductible.
In this case, during the 2014-15 income year your client made contributions into the Fund. Your client subsequently commenced a pension from the Fund. Your client now intends to claim a deduction in respect of their personal contribution to the Fund.
As shown above, the legislation itself is quite specific and only allows a deduction for personal contributions to a superannuation fund subject to the necessary requirements being met. In order for a person to claim a deduction for personal contributions made to a superannuation fund they must provide a valid notice of their intention to claim the deduction to the trustee of their superannuation fund. In addition, a notice is not valid where the superannuation provider has commenced to pay an income stream based in whole or part on the contribution.
As your client has already commenced a pension with the Fund any notice provided to the Fund will not be a valid notice. Therefore, section 290-170 of the ITAA 1997 has not been satisfied.
Please note that the notice will not be valid even though your client intends to claim a deduction of which is less than their contribution to the Fund minus the amount transferred to commence a pension. This is consistent with Example 11 of TR 2010/1 which states:
Example 11 - invalid notice of intention to deduct
100. Libby has a superannuation interest valued at $150,000. Libby makes a $50,000 personal contribution in March 2008 so that her interest is valued at $200,000.
101. If, before lodging a section 290-170 notice, she were to commence a pension using $180,000 of her $200,000 interest, her fund will have commenced to pay a superannuation income stream based in whole or part on the contribution. A notice Libby purports to give her fund to deduct the contribution will be invalid.
102. Further, the outcome will be same even if, after making her personal contribution, Libby were to commence a pension of only $140,000 leaving the value of her interest in excess of the amount she intended to deduct.
5. As all of the conditions under section 290-150 of the ITAA 1997 have not been satisfied your client is not entitled to claim a deduction for the personal superannuation contribution made to the Fund in the 2014-15 income year.
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