Edited version of private ruling

Authorisation Number: 1011705615066

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Ruling

Question

Can your client claim a deduction in respect of personal superannuation contributions for the income year under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answers

No

This ruling applies for the following period

2009-10 income year.

The scheme commenced on

1 July 2009

Relevant facts

Your client is under the age of 65.

Your client has made a personal superannuation contribution to a superannuation fund in the income year.

Your client intends to claim a deduction for his personal superannuation contribution.

You advise that your client received employment income in excess of 10% of their total assessable income in the 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 Subsection 290-150(2).

Income Tax Assessment Act 1997 Section 290-155.

Income Tax Assessment Act 1997 Section 290-160.

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

Income Tax Assessment Act 1997 Section 290-165.

Income Tax Assessment Act 1997 Section 290-170.

Reasons for decision

Issue 1

Summary

Your client is not entitled to claim a deduction for personal superannuation contributions in the income year because he has not satisfied the maximum earnings as an employee condition. Your client's income from employment activities is in excess of 10% of his assessable income for the year.

Detailed reasoning

Personal deductible superannuation contributions:

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

However, 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 be satisfied before a person can claim a deduction for the contributions made in that income year.

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 their assessable income and reportable fringe benefits must be attributable to those activities. Subsection 290-160(1) states:

This section applies if:

(a)    in the income year in which you make the contribution, you engage in any of these activities:

(i)       holding an office or appointment;

(ii)     performing functions or appointment;

(iii)    engaging in work;

(iv)    doing acts or things; and

(b)    the activities result in you being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (assuming that subsection 12(11) of that act has not been enacted).

In this case your client was employed in the income year. Therefore, your client is an employee for the purposes of the SGAA during the income year.

Consequently, section 290-160 of the ITAA 1997 applies to your client in the income year.

Where section 290-160 of the ITAA 1997 applies to a person, subsection 290-160(2) of the ITAA 1997 states that:

To deduct the contribution, less than 10% of the total of the following must be attributable to the activities:

(a)     your assessable income for the income year;

(b)     your reportable fringe benefits total for the income year;

(c)     the total of your reportable employer superannuation contributions for the income year.

This means that in order to satisfy the condition set out under section 290-160 of the ITAA 1997, your client's total assessable income and reportable fringe benefits attributable to his employment must be less than 10% of his total assessable income and reportable fringe benefits for the income year.

In the income year, you have advised the total payments your client received as an employee was in excess of ten percent of their total assessable income.

As your client's employment income will be greater than ten percent of his total assessable income and reportable fringe benefits for the income year, section 290-160 of the ITAA 1997 will not be satisfied.

The legislation itself is quite specific. It allows a deduction, subject to the necessary requirements, notably only where less than 10% of a person's assessable income and reportable fringe benefits are attributable to those activities of an employee. The legislation does not contain a discretion that can be exercised by the Commissioner to allow a deduction where the maximum earnings condition as an employee is not met.

As the condition in section 290-160 of the ITAA 1997 has not been satisfied, and all the conditions in subsection 290-150(2) of the ITAA 1997 must be satisfied in order to claim a deduction, it is not necessary to determine whether the conditions of 290-165 and 290-170 of the ITAA 1997 have been satisfied.

Conclusion:

As your client has not satisfied all the conditions in section 290-150 of the ITAA 1997, he is not eligible to claim a deduction for any personal superannuation contributions made in the income year.