Edited version of private ruling

Authorisation Number: 1011699794469

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Ruling

Subject: Timing of superannuation contributions

Questions

Are your clients able to claim a deduction for personal superannuation contributions for the 2009-10 income year under section 290-170 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No

Should the Superannuation Fund include the personal superannuation contributions in its assessable income for the 2009-10 income year in accordance with subsection 295-190(1) of the ITAA 1997?

Answer

No

This ruling applies for the following period:

Year ending 30 June 2010

The scheme commences on:

1 July 2010

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

Your clients, Taxpayer A and Taxpayer B are members of a superannuation fund (the Fund).

Your clients sold a property and the contract was exchanged prior to the end of the 2009-10 income year with an intended specific settlement date.

Your clients intended to contribute part of the proceeds from the sale of the property as personal superannuation contributions to the Fund prior to 30 June 2010.

Due to the unforseen circumstances the contract was not settled on the intended date.

In fact, the contract was settled after 30 June 2010, in the 2010-11 income year.

Concessional superannuation contributions for Taxpayer A and Taxpayer B were received by the trustee of the Fund in the 2010-11 income year.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 290-150.

Income Tax Assessment Act 1997 Subsection 290-150(1).

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 Subsection 290-170(2).

Income Tax Assessment Act 1997 Subsection 295-190(1).

Income Tax Assessment Act 1997 Subsection 295-190(2).

Reasons for decision

Summary of decision

Your clients are not entitled to claim a deduction for personal superannuation contributions for the 2009-10 income year as the contributions were not made to the superannuation fund until the following income year.

The Commissioner has no discretion to allow a deduction in an income year other than the one in which a superannuation contribution is made.

As your clients' contributions were recorded as being received by the superannuation fund in the 2010-11 income year, these contributions must be included in the superannuation fund's assessable income for the 2010-11 income year and not the 2009-10 income year.

Detailed reasoning

Year of receipt of the contribution

In respect of both the income of a complying superannuation fund and a deduction allowable to a person for their personal superannuation contributions, the relevant year of income is the year in which the contribution is made.

Taxation Ruling TR 2010/1 discusses at length the Commissioner of Taxation's view on how and when a contribution is made to a superannuation fund.

Paragraph 12 of TR 2010/1 states:

A superannuation fund's capital is most commonly increased by transferring funds to the superannuation provider and, as a general rule, the contribution will be made when the funds are received by the superannuation provider.

It is clear that a fund member is only taken to have made a contribution to their superannuation fund when the trustee of superannuation fund receives it.

In the present case, deductible superannuation contributions were intended to be made to the Fund from the proceeds of the sale of a property, prior to 30 June 2010. Due to unforseen circumstances, the contract was not settled on the intended date, and the superannuation contributions were actually made to the Fund in the 2010-11 income year.

It is a question of fact that the contributions were made and received by the trustee of the Fund in the 2010-11 income year. Accordingly, the year of receipt of the contributions is the 2010-11 income year and not the 2009-10 income year.

Deduction for a personal superannuation contribution

A taxpayer can claim a deduction, under section 290-150 of the ITAA 1997, for a personal contribution they make to a superannuation fund in a particular income year for the purpose of providing superannuation benefits for themselves, provided the conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997 are satisfied.

Therefore an individual is eligible to claim a deduction for a superannuation contribution only if that contribution:

· is made in order to obtain super benefits for themself, or for their dependants in the event of their death (subsection 290-150(1) of the ITAA 1997);

· is made to a complying superannuation fund (section 290-155 of the ITAA 1997);

· satisfies the 'maximum earnings as an employee' condition (section 290-160 of the ITAA 1997);

· meets the age-related conditions (section 290-165(2) of the ITAA 1997);

· is covered by a notice written to their super fund or RSA provider, in the form approved by the Commissioner and advising the amount that will be claimed as a deduction (section 290-170 of the ITAA 1997); and

· the super fund or RSA provider has acknowledged their notice of intent and agreed to the amount to be claimed as a deduction (section 290-170(2) of the ITAA 1997).

As discussed above, a deduction under section 290-150 of the ITAA 1997 will be allowable only in the income year in which the payment is actually received by the trustee of the fund.

Whether or not the intention was for the payment to be made on or before 30 June 2010 is not relevant. What is relevant is whether or not the contribution was made and received by the trustee of the superannuation fund by 30 June 2010.

It is clear from the facts in this case that the contributions were received by the trustee of the Fund after the 30 June 2010. Therefore these superannuation contributions were made in the 2010-11 income year.

Further to the above, it should be noted that the Commissioner has no discretion to allow a deduction for superannuation contributions in an income year other than the one in which they are made. The Commissioner can only exercise, or refuse to exercise, a discretion when he is given that discretion in the legislation that he administers.

Superannuation fund income

Division 295 of the ITAA 1997 sets out special rules governing the taxation of superannuation funds and specifically states how to calculate the taxable income of those entities and to identify the components of that income in order to apply the appropriate income tax rate.

Certain contributions to a fund are included in its assessable income for the year of income (the year of receipt) and subject to tax in the hands of the fund (at 15% for a complying fund), except where the tax liability for those contributions has been transferred to another entity.

Contributions for which a member is claiming a deduction are included in item 1 of the table in section 295-190 of the ITAA 1997 and are therefore included in the assessable income of the fund.

Subsection 295-190(2) of the ITAA 1997 operates to include a personal contribution in the assessable income of a fund in the income year in which it is received.

In this instance, these are personal contributions for which the member has provided a valid notice under section 290-170 of the ITAA 1997, as mentioned above.

In this case, your clients' personal superannuation contributions were received by the Fund after 30 June 2010, which is in the 2010-11 income year. Therefore, these contributions must be included in the superannuation fund's assessable income for that year and not the 2009-10 income year.