Edited version of private advice

Authorisation Number: 1013037948212

Date of advice: 21 June 2016

Ruling

Subject: Deductibility of personal superannuation contributions

Question

Is the Taxpayer entitled to claim a deduction for personal superannuation contributions to be made in the 2015-16 income year under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes

This ruling applies for the following period:

Income year ending 30 June 2016

The scheme commences on:

1 July 2015

Relevant facts and circumstances

The Taxpayer is less than 65 years of age.

The Taxpayer is semi-retired and received income during the 2015-2016 year from a number of sources. These being a:

• A taxable superannuation pension
• Income from shares
• Income from as an investment property held solely by the Taxpayer
• Income from being on a Board
• Income from consultancy work

In relation to the income from the Taxpayer's role on the Board;

• the remuneration is monthly;
• there are no specific hours that the Taxpayer devotes to this role;
• the Taxpayer works the hours needed, which does not have an effect on the monthly remuneration; and
• the Taxpayer receives no form of payment for leave of any kind, nor does are any superannuation contributions received from the Board.

The Taxpayer receives income for consulting work performed with from separate entities (the entities).

The Taxpayer has stated that in relation to the consultancy work with the entities:

• it is paid at an hourly rate;
• there is no specification of hours which must be worked;
• payment is a flat fee for the actual number of hours worked and travel time over a given period; and
• no form of payment for leave of any kind nor any superannuation is received

Copies of invoices which the Taxpayer supplied to the entities have been provided in addition to an agreement between the Taxpayer one of the entities showing, amongst other matters, that the Taxpayer acts in a private capacity.

The Taxpayer intends to make a personal superannuation contribution to their designated complying superannuation fund (the Fund).

The Taxpayer will provide a written notice to the trustee of the Fund stating an intention to claim a deduction in respect of the contributions.

The Taxpayer expects to receive an acknowledgment notice issued by the trustee of the Fund acknowledging the Taxpayer's intention to claim a deduction.

The Taxpayer has stated that deduction for the personal superannuation contributions will not add to or create a loss in relation to their taxable income for the 2015-16 income year.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 290-150.

Income Tax Assessment Act 1997 section 290-160.

Income Tax Assessment Act 1997 subsection 290-160(1).

Income Tax Assessment Act 1997 paragraph 290-160(1)(a)

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

Superannuation Guarantee (Administration) Act 1992 subsection 12(2).

Reasons for decision

Summary of decision

The Taxpayer can claim a deduction for the proposed superannuation contribution they will make in the 2015-16 income year as all the conditions of Section 290-150 of the ITAA 1997 will be satisfied.

The contribution will be a concessional contribution in this income year.

Detailed reasoning

Deduction for personal deductible superannuation contributions

A person must satisfy the conditions in section 290-150 of the ITAA 1997 before they can claim a deduction for personal contributions made to a superannuation fund for the purpose of providing superannuation benefits for themselves (or their dependants after their death).

Subsection 290-150(2) of the ITAA 1997 provides that the conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997 must also be satisfied before a person can claim a deduction for the contributions made in that income year. These conditions are explained in detail in Taxation Ruling TR 2010/1 Income tax: superannuation contributions.

The Taxpayer intends to make a deduction to (the Fund) for the 2015-16 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 in which the contribution is made.

In this case, the Taxpayer intends to make personal superannuation contributions to the Fund. As this fund is a complying superannuation fund, this requirement will be satisfied.

Maximum earnings as an employee condition

The condition in section 290-160 of the ITAA 1997 requires that if a taxpayer is engaged in any activities that result in them being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA), then less than 10% of the total of the following must be attributable to those activities:

• their assessable income for the income year;
• their reportable fringe benefits (RFB) for the income year; and
• the total of their reportable employer superannuation contributions (RESC) for the income year.

This calculation is referred to as the 'maximum earnings test'.

Taxation Ruling TR 2010/1 outlines the Commissioner's view of the requirements to be satisfied for a deduction of superannuation contributions. Amongst other things, the Commissioner discusses the operation of the maximum earnings as an employee condition. Paragraph 58 states that:

Those persons who have not engaged in an 'employment' activity in the income year in which they make a contribution, such as persons who although receiving workers' compensation payments are not employed at any time during the year, are not subject to the maximum earnings test.

Subsection 290-160(1) of the ITAA 1997 applies the maximum earnings as an employee condition only if, in the income year in which the contribution is made, the person is engaged in any of the following activities (paragraph 290-160(1)(a) of the ITAA 1997):

• holding an office or appointment (for example, a director of a company);
• performing functions or duties;
• engaging in work;
• doing acts or things; and
• the activities result in that person being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA).

Subsection 12 (2) of the Superannuation Guarantee (Administration) Act 1992 states:

a person who is entitled to payment for the performance of duties as a member of the executive body (whether described as the board of directors or otherwise) of a body corporate is, in relation to those duties, an employee of the body corporate.

In view of the above, the Taxpayer's income from the Board of $X, is attributable to employment activities for the 2015-16 income year.

In relation to the Taxpayer's income from consultancy activities, totalling $XX, it is considered that the facts provided support that income as not being from activities which would result in the Taxpayer being viewed as an employee.

During the 2015-16 income year it is noted that the Taxpayer's was also receipt of other non-employment related sources, those being from:

• A taxable superannuation pension
• Income from shares
• Income from as an investment property held solely by the Taxpayer.

The Taxpayer's total income, from both employment and non-employment related sources, totals $XXX. Therefore, the percentage of the Taxpayer's total income to be classified as employment-related is less than 10%.

Based on the above, the Taxpayer has satisfied the maximum earning condition for the 2015-16 income year.

Age-related condition

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 intends to make contributions to the Fund in the 2015-16 income year. The Taxpayer is under the age of 75 in the 2015-16 income year, and will satisfy the age-related condition in section 290-165 of the ITAA 1997.

Notice of intent to deduct conditions

Subsections 290-170(1) and (2) of the ITAA 1997 set out the notice and validity requirements which must be satisfied to claim a deduction for superannuation contributions.

Subsection 290-170(1) of the ITAA 1997 requires a valid notice of intent to claim a deduction in the approved form be provided to the superannuation or RSA provider. The notice must be provided before the taxpayer lodges his or her income tax return for the year or within 12 months of the end of the income year if the taxpayer had not lodged his or her return by that time. The trustee must also acknowledge receipt of the notice.

Subsection 290-170(2) of the ITAA 1997 requires the following conditions to be satisfied for a notice of intent to deduct to be valid:

1. the notice is not in respect of the contribution;
2. the notice includes all or a part of an amount covered by a previous notice;
3. when you gave the notice:
   1. you were not a member of the fund or the holder of the * RSA; or
   2. the trustee or * RSA provider no longerholds the contribution; or
   3. the trustee or RSA provider has begun to pay a * superannuation income stream based in whole or part on the contribution;
4. before you gave the notice:
   1. you had made a contributions-splitting application (within the meaning given by the regulations) in relation to the contribution; and
   2. the trustee or RSA provider to which you made the application had not rejected the application.

The Taxpayer intends to provide a valid notice of intent to claim the deduction to the Fund once the proposed contribution is made. The Taxpayer will await an acknowledgment of receipt of the notice from the trustee of the Fund prior to claiming the deduction.

The Taxpayer's notice of intent to deduct will meet the notice conditions in subsection 290-170(1) of the ITAA 1997 provided the Taxpayer lodges this notice with the Fund trustee before the Taxpayer lodges their income tax return for the 2015-16 income year, or by 30 June 2017 (whichever is the earlier), and the trustee duly acknowledges this notice.

The Taxpayer's notice of intent to deduct will be valid provided it satisfies the validity conditions listed above in subsection 290-170(2) of the ITAA 1997.

Deduction limited by amount specified in notice

Subsection 290-175 of the ITAA 1997 states that the deduction cannot be more than the amount covered by the notice given under section 290-170 of the ITAA 1997.

Provided the amount of the deduction the Taxpayer will claim does not exceed the amount specified in his section 290-170 notice, the Taxpayer will also satisfy this requirement.

Deduction limits

Allowable deductions are limited under subsection 26-55(2) of the ITAA 1997 to the amount of assessable income remaining after subtracting all other deductions from a taxpayer's assessable income. Furthermore, allowable deductions cannot create or increase a loss to be carried forward.

The Taxpayer has advised that the deduction for the proposed contribution will not add to or create a loss. Accordingly, The Taxpayer will satisfy this condition.

Conclusion

As the Taxpayer satisfies all the required conditions for deductibility under section 290-150 of the ITAA 1997, the Taxpayer can claim a deduction for the personal superannuation contributions to be made to the Fund in the 2015-16 income year.

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