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Edited version of your written advice
Authorisation Number: 1051359854339
Date of advice: 23 April 2018
Ruling
Subject: Personal superannuation contributions
Question
Is the Taxpayer entitled to claim a deduction under section 290-150 of the Income Tax Assessment Act 1997 in respect of their personal superannuation contributions?
Answer
No
This ruling applies for the following period:
Year ended 30 June 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
We received a private ruling application regarding the deductibility of personal superannuation contributions.
In the ruling application, you advised the following:
● The Taxpayer made a contribution to a complying fund and life insurance policy;
● The Taxpayer made a contribution to a complying superannuation fund.
● The Taxpayers salary and wages income makes up 20% of their taxable income and 21% of their gross income.
● The Taxpayer earned both personal services income and income from salary and wages
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 290-150
Income Tax Assessment Act 1997 Subsection 290-150(2)
Income Tax Assessment Act 1997 Section 290-155
Income Tax Assessment Act 1997 Subsection 290-160(1)
Income Tax Assessment Act 1997 Paragraph 290-160(1)(a)
Income Tax Assessment Act 1997 Paragraph 290-160(1)(b)
Income Tax Assessment Act 1997 Subsection 290-160(2)
Reasons for decision
Personal superannuation contributions
A person can claim a deduction for personal contributions made to their superannuation fund for the purpose of providing superannuation benefits for themselves under section 290-150 of the ITAA 1997.
However, subsection 290-150(2) of the ITAA 1997 provides that the conditions in sections 290-155, 290-160 (if applicable), 290-165 and 290-170 must all be satisfied before the person can claim a deduction for the contributions made in that 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, that fund must be a complying superannuation fund for the income year in which the contribution is made.
The Taxpayer made personal superannuation contributions are complying funds, satisfying the complying superannuation fund condition set out in section 290-155 of the ITAA 1997.
Maximum earnings as an employee condition
Subsection 290-160(1) of the ITAA 1997 provides that the maximum earnings test will apply if, in the income year in which the contribution is made, a person is engaged in any of the following activities:
● holding an office or appointment;
● 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).
The operation of the maximum earnings as an employee test is discussed in Taxation Ruling TR 2010/1 Income tax: superannuation contributions (TR 2010/1). Relevantly, paragraphs 57 and 58 of TR 2010/1 state:
57. Those persons who are engaged in an ‘employment’ activity in the income year in which they make a contribution need to meet an earnings test if they are to deduct their contribution.
58. 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(2) states that to deduct the contribution, less than 10% of the following must be attributable to ‘employment activites’:
● your assessable income for the income year;
● your *reportable fringe benefits total for the income year;
● the total of your *reportable employer superannuation contributions for the income year
As the Taxpayer is earning wages and salary income, they are considered to be an employee for the purposes of SGAA 1992; and therefore subject to the 10% test is outlined in subsection 290-160(2) of the ITAA 1997.
As the Taxpayer’s wages and salary income earned as an employee comprises of 20% of their taxable income and 21% of their gross income, it is considered that they do not satisfy the maximum earnings condition under section 290-160 of the ITAA 1997.
Conclusion
As the Taxpayer doesn’t satisfy the maximum earnings condition under section 290-160 of the ITAA 1997, they are not entitled to claim a deduction on their personal superannuation contributions.
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