Edited version of private ruling

Authorisation Number: 1011902141918

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Ruling

Subject: Deduction for personal superannuation contributions to a constitutionally protected fund

Question

Can you claim a deduction for a personal superannuation contribution made to a constitutionally protected fund (CPF) in the 2010-11 income year under section 290-150 of the Income Tax Assessment Act 1997?

Answer

Yes.

This ruling applies for the following periods

Year ended 30 June 2011

Year ending 30 June 2012

The scheme commenced on

1 July 2010

Relevant facts

You are fully self-employed, and you work almost full-time.

You are a member of a superannuation fund (the Fund). During the 2010-11 income year, you made a personal superannuation contribution to the Fund.

You were under age 75 at the time you made your personal contribution

The Fund is a constitutionally protected fund (CPF). The Fund is a complying superannuation fund.

Advisors have informed you that tax deductible personal contributions to the Fund are excluded from being treated as concessional contributions. Therefore, you were informed that your personal contribution is not subject to the concessional contributions cap of $50,000.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 26-55(2).

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 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 Paragraph 290-160(1)(b).

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

Income Tax Assessment Act 1997 Section 290-165.

Income Tax Assessment Act 1997 Subsection 290-165(2).

Income Tax Assessment Act 1997 Section 290-170.

Income Tax Assessment Act 1997 Section 290-175.

Income Tax Assessment Act 1997 Subparagraph 292-25(2)(c)(iii).

Income Tax Assessment Act 1997 Subsection 995-1(1).

Income Tax Assessment Regulations 1997 Regulation 995-1.04.

Superannuation Industry (Supervision) Regulations 1994 Subregulation 7.01(3).

Superannuation Industry (Supervision) Regulations 1994 Subregulation 7.04(1).

Reasons for decision

Summary

You can claim a deduction in the 2010-11 income year for the entire personal contribution you made to a constitutionally protected fund during this income year, provided you give a valid notice of intent to claim the deduction to the trustee of the fund, the fund trustee acknowledges this notice, and the deduction you will claim for your personal contribution does not add to or create a loss in this income year.

Detailed Reasoning

Personal superannuation contributions made in the 2010-11 and 2011-12 income years

A person can claim a deduction for personal contributions made to a superannuation fund for the purpose of providing superannuation benefits for themselves under section 290-150 of the Income Tax Assessment Act 1997 (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. These conditions are explained in detail in Taxation Ruling TR 2010/1 (TR 2010/1) entitled 'Income Tax: superannuation contributions'.

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 of the fund in which you made the contribution.

The Fund is a complying superannuation fund.

Therefore, this condition is satisfied.

Age-related conditions

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.

You were under age 75 at the time you made your personal contribution to the Fund during the 2010-11 income year.

Therefore, you satisfy the age-related conditions in the 2010-11 income year.

Please note that the effect of subsection 290-165(2) of the ITAA 1997 is similar to the effect of item 3 of subregulation 7.04(1) of the SIS Regulations. This subregulation governs your ability to contribute to the Fund. Effectively, you can not make personal contributions to any complying superannuation fund after the day that is 28 days after the end of the month in which you turn 75.

Further, a person over the age of 65 must be gainfully employed on at least a part-time basis in order to be able to make contributions to a complying superannuation fund. In this respect it is noted that you are currently self employed and working almost full-time.

Notice of intent to deduct conditions

Section 290-170 of the ITAA 1997 requires a person to provide a valid notice of their intention to claim the deduction to the trustee of their superannuation fund. The written notice of intent must be given to the fund trustee before the earlier of:

· the date you lodge your income tax return for the income year in which the contribution was made; or

· the end of the income year following the year in which the contribution was made.

In addition, you must also have been given an acknowledgement of the notice by the trustee of the superannuation fund.

A notice will be valid as long as the following conditions are satisfied:

· the notice is in respect of the contribution;

· the notice is not for an amount covered by a previous notice;

· at the time when the notice is given:

o you are a member of the fund;

o the fund trustee holds the contribution (for example, a notice will not be valid if a partial roll-over of the superannuation benefit which includes the contribution covered in the notice has been made);

o the fund trustee has not begun to pay a superannuation income stream based on the contribution; or

· before the notice is given:

o a contributions splitting application has not been made in relation to the contribution; and;

o the fund trustee has not rejected the application.

In respect of the 2010-11 income year, provided you lodge a valid notice of intent with the fund trustee before you lodge your income tax return for this income year or by 30 June 2012, whichever is the earlier, and the trustee duly acknowledges your notice, the notice of intent to deduct conditions will be satisfied in this income year.

Deduction limited by amount specified in your notice of intent

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.

In the 2010-11 income year, provided the amount of the deduction you will claim does not exceed the amount specified in your notice of intent, you will also satisfy this requirement in each income year.

Deduction limits

The allowable deduction is limited under subsection 26-55(2) of the ITAA 1997 to the amount of assessable income remaining after subtracting all other deductions (excluding previous years tax losses and any deductions for farm management losses) from a taxpayer's assessable income. Therefore a deduction for personal superannuation contributions cannot add to or create a loss.

You can claim a deduction in respect of the contribution you made during the 2010-11 income year, provided the deduction does not add to or create a loss.

Deductions for your personal contributions to the Fund

On the facts provided, it is accepted that you will satisfy all the required conditions in subdivision 290-C of the ITAA 1997, in respect of the personal contribution of you made to the Fund in the 2010-11 income year. Therefore, you can claim a deduction in this income year for the entire amount of this contribution.

The contributions are not concessional contributions

As described in the facts, the Fund is a constitutionally protected fund (CPF).

Therefore, subparagraph 292-25(2)(c)(iii) of the ITAA 1997 operates to exclude your personal contributions from being concessional contributions in the 2010-11 financial year.

Accordingly, the contribution you made in the 2010-11 financial year is not counted towards your annual concessional contributions cap for this financial year.

To the extent that each contribution forms part of the contributions segment of your superannuation interest in the CPF (which includes personal undeducted contributions), each contribution will be a non-concessional contribution, and will be counted towards your non-concessional contributions cap for the financial year in which the contribution is made to the Fund.

As you are over age 50, your non-concessional contributions cap for the 2010-11 financial year is $150,000. In addition, because you are over age 65, you are not eligible to use the bring-forward provisions for your contributions.

Conclusion

In view of all the above, where:

· you satisfy the work test for gainful employment;

· you make personal contributions to the CPF during the 2010-11 income year; and

· you satisfy all the required conditions in subdivision 290-C of the ITAA 1997 in the income year in which the contribution is made;

· you can contribute to the CPF and claim a deduction for the contribution regardless of your concessional contributions cap for the relevant financial year.