Edited version of private ruling

Authorisation Number: 1011624044649

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Ruling

Subject: Employer superannuation contributions

Question:

Under section 290-60 of the Income Tax Assessment Act 1997 (ITAA 1997), can your client claim a tax deduction in the current income year for employer superannuation contributions received by the superannuation fund in respect of the previous income year and the current income year?

Answer:

Yes

This ruling applies for the following periods:

Year ended 30 June 2009

Year ended 30 June 2010

The scheme commenced on:

1 July 2009

Relevant facts:

Your client made superannuation contributions for the benefit of eligible employees, in respect of the relevant income year.

The employer superannuation contributions were electronically transferred via internet transfer early in the other income year to a complying self managed superannuation fund.

Later, in same income year, your client also made employer superannuation contributions for the benefit of the eligible employees to various complying superannuation funds in respect of the other income year.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 290-60

Income Tax Assessment Act 1997 Subsection 290-60(3)

Income Tax Assessment Act 1997 Section 290-70

Income Tax Assessment Act 1997 Section  290-75

Income Tax Assessment Act 1997 Section  290-80

Reasons for decision

Summary

Employer superannuation contributions made in respect of the relevant and other income years, but both paid in the other income year, can be claimed as a deduction in the other income year. All contributions made in the other income year need to be added together and will count towards the concessional contribution cap which is $25,000 per person per year for the income year. Please be aware, additional tax may be imposed on the eligible employees if contributions exceed this cap.

Detailed reasoning

Deduction for employer contributions to a superannuation fund

An employer must satisfy the conditions in section 290-60 of the Income Tax Assessment Act 1997 (ITAA 1997) before it can claim a deduction in respect of contributions made to a superannuation fund, or an RSA, for the purpose of providing superannuation benefits for its eligible employees.

Further, subsection 290-60(3) of the ITAA 1997 provides the employer may only deduct contributions in the income year in which they are made.

Taxation ruling TR 2010/1 (TR 2010/1) provides guidelines to ascertain when a superannuation contribution is made. Paragraph 12 of TR 2010/1 states that:

…as a general rule, the contribution will be made when the funds are received by the superannuation provider.

A specific rule in regards to the electronic transfer of funds is provided in paragraph 13 of TR 2010/1:

If the funds are transferred by an electronic transfer of funds to the superannuation provider, a contribution is made when the funds are credited to the superannuation provider's account.

From the above, an employer is only taken to have made superannuation contributions to a superannuation fund when the fund receives it.

The legislation itself is quite specific. It allows a deduction, subject to the necessary requirements being met, only for the income year in which the contributions have been made. It does not contain a discretion that can be exercised by the Commissioner of Taxation to allow a deduction for the relevant year of income where the contributions are actually made in a later year of income.

It should be noted that, there is a discretion available to superannuation funds to accept late contributions subject to the fund capped amount, according to subregulation 7.04(2) of the Superannuation Industry (Supervision) Regulations 1994. However, this will have no effect on the deductibility of those contributions. In other words, if a superannuation fund accepts a late contribution, the contribution will only be deductible to the payer in the income year in which it was paid, and not in the income year to which it was intended to relate.

In this case, employer superannuation contributions, in respect of the relevant and other income years, both were paid in the other income year. Therefore, those contributions can only be considered as a deduction in the other income year.

Accordingly, your client may claim a deduction in respect of both amounts of contributions in the other year of income, provided the conditions in sections 290-70, 290-75 and 290-80 of the ITAA 1997 are all satisfied.

Concessional contributions

From 1 July 2007, concessional contributions made to superannuation funds are subject to an annual cap. For the other income year, this cap is $25,000 per person per year.

If a person has more than one fund, all concessional contributions made to all their funds are added together and count towards the cap.

All contributions made by your client for each eligible employee in the other income year will count against each employee's cap of $25,000. Contributions in excess of this cap will be taxed at an additional 31.5 per cent. This tax will be imposed on the eligible employees of your client, who will be able to withdraw from their superannuation fund an amount equal to their tax liability.

Amounts in excess of the concessional contributions cap are also counted towards the non-concessional contributions cap.