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Ruling

Subject: Deduction for personal superannuation contributions

Question:

Can you claim a deduction in respect of personal superannuation contributions for the 2010-11 income year under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer:

No

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts:

You are a member of your self managed superannuation fund (the Fund).

You intended to make personal superannuation contributions to the Fund in the 2010-11 income year.

In mid June 2011, you transferred funds for yourself and your spouse via a commercial bank (the Bank) internet banking system to the Fund.

The transfer date of the funds to the Fund was scheduled to occur prior to 30 June 2011.

There were sufficient funds in your bank account to cover the transaction.

In the beginning of the 2011-12 income year upon reviewing your bank account details you realised that the transaction was not successful.

Upon review with the Bank you found that the transaction was rejected due to exceeding the daily limit. You had not been notified immediately by the system that your transaction was not successful.

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 Subsection 290-150(3).

Income Tax Assessment Act 1997 Subsection 290-150(4).

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 152-305(1).

Income Tax Assessment Act 1997 Subsection 152-305(2).

Reasons for decision

Summary

You are not entitled to claim a deduction for personal superannuation contributions as no superannuation contributions were received by the trustee of your self managed superannuation fund for your benefits in the 2010-11 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.

Detailed reasoning

Personal deductible superannuation contributions:

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).

A person can only claim a deduction for personal contributions made to a superannuation fund where all conditions under section 290-150 of the ITAA 1997 have been satisfied.

Section 290-150 of the ITAA 1997 states:

1. You can deduct a contribution you make to a superannuation fund, or an RSA, for the purpose of providing superannuation benefits for yourself (regardless whether the benefits are payable to your SIS dependants if you die before or after becoming entitled to receive the benefits).

2. However, the conditions in sections 290-155, 290-160 (if applicable), 290-165 and 290-170 must also be satisfied for you to deduct the contribution.

3. You can deduct the contribution only for the income year in which you made the contribution.

4. If the contribution is attributable in whole or part to a capital gain from a CGT event:

(a) if you disregarded all or part of the capital gain from the CGT event under subsection 152-305(1) and you were under 55 just before you made the choice mentioned in that subsection - you cannot deduct the contribution to the extent that it is attributable to the capital gain; or

(b) if a company or trust disregarded all or part of the capital gain from the CGT event under subsection 152-305(2) and you were under 55 just before the contribution was made - you cannot deduct the contribution to the extent that it is attributable to the capital gain.

Subsection 290-150(3) of the ITAA 1997 clearly states that a taxpayer may only deduct contributions in the income year in which they are made.

Taxation Ruling TR 2010/1 entitled 'Income tax: superannuation contributions' sets out the Commissioner's view on contributions made to a superannuation fund, an approved deposit fund or a retirement savings account.

Item 2 of paragraph 13 of TR 2010/1 states that if funds are transferred by making an electronic transfer of funds to the superannuation provider then the contribution is made when the funds are credited to the superannuation provider's account.

In relation to when a superannuation contribution is made TR 2010/1 goes on to state at paragraphs 182 and 186:

182. A superannuation contribution is made when the capital of the fund is increased. As explained in paragraphs 183 to 210 of this Ruling, the contribution may be made when an amount is received, or ownership of an asset is obtained or the fund otherwise obtains the benefit of an amount.

Contributions of funds

183. A contribution of funds as cash or an electronic funds transfer, is made when the amount is received by the superannuation provider or credited to the relevant account.

184. It has been suggested that a contribution made by electronic funds transfer may occur as soon as the contributor has done everything necessary to effect a payment. The Commissioner does not accept that is sufficient to increase the capital of the fund.

185. Electronic payment systems operate through contractual arrangements between the:

· payer and payer's financial institution;

· payer's financial institution and payee's financial institution; and

· payee's financial institution and payee.

186. When a financial institution agrees to accept a payment instruction it notifies the receiving institution of the details of the payment. In Australia there are several different clearing systems for the transferring of information and netting of amounts to be transferred between institutions. The clearing rules of these systems bind the financial institutions but not the customers. Most small payments between institutions are not processed in real time but are subject to deferred net settlement which occurs overnight. As such, it is not until an amount is credited to a bank account of the superannuation provider that a contribution will be taken to be made.

From the above, it can be said that a fund member is only taken to have made a contribution to their superannuation fund when the superannuation fund receives it.

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 superannuation fund.

Whether or not the intention (in good faith) was for the payment to be made on or before 30 June 2011 is not relevant. What is relevant is whether or not the contributions were received by the trustee of the superannuation fund by 30 June 2011.

In this case, deductible superannuation contributions were intended to be made to the Fund prior to 30 June 2011. Due to unforseen circumstances, the transfer of the funds via internet banking system was not successful.

It is a question of fact that no superannuation contributions were received by the trustee of the Fund for your benefits in the 2010-11 income year. Accordingly, a deduction for the superannuation contributions is not available to you 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.