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Ruling

Subject: Deduction for personal contribution

Is your client entitled to claim a deduction for personal superannuation contributions made in the 2010-11 income year?

Answer:

No

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commences on:

1 July 2010

Relevant facts and circumstances

Your client is under 65 years of age.

In the 2010-11 income year, your client was a member of Fund A and Fund B, both public offer superannuation funds.

Your client's late spouse facilitated a non-concessional contribution into your client's Fund A superannuation account in the 2008-09 income year. This non-concessional contribution triggered the bring forward of $450,000 for your client, which applied through to the 2010-11 income year.

Your client's late spouse was receiving an account based pension from Fund A, which commenced few years ago.

As a result of the death of your client's spouse, your client requested the balance of the late spouse's pension account to be paid as a superannuation lump sum death benefit.

In the 2010-11 income year, your client contacted the trustee of Fund A and asked if they could have the death benefit paid directly into their Fund A superannuation account.

In mid 2010, the death benefit was transferred into your client's Fund A superannuation account. This amount was treated as a non-concessional contribution.

As a result of the transfer, your client had excess non-concessional contributions in the 2010-11 income year.

In the beginning of the 2011-12 income year, your client's entire superannuation benefits in Fund A were rolled over into Fund B.

After the roll-over, your client provided a written notice to the trustee of Fund A advising your client's intention to claim a tax deduction in respect of the personal contribution made, that is the amount transferred, in the 2010-11 income year.

Your client has not yet lodged their 2010-11 income tax return.

Your client had been on a disability pension for some years and subsequently on a carer's pension, until their spouse passed away.

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(1).

Income Tax Assessment Act 1997 Paragraph 290-170(2)(c).

Reasons for decision

Summary

A deduction for personal superannuation contributions is not allowable to your client. One condition for deductibility is that a person lodges a valid notice of intent to claim a deduction and that notice is acknowledged by the trustee of the superannuation fund.

In this case your client has not lodged a valid notice of intention to claim a tax deduction for the 2010-11 income year, as your client was no longer a member of Fund A when the notice was lodged. Further, Fund A has not acknowledged your client's notice of intention to claim a tax deduction for the 2010-11 income year.

Because the notice of intent to deduct condition has not been satisfied, your client is not entitled to claim a deduction for personal superannuation contributions made in the 2010-11 income year.

Detailed reasoning

Deductions for superannuation contributions

Subsection 290-150(1) of the Income Tax Assessment Act 1997 (ITAA 1997) allows a person to claim a deduction in respect of personal contributions made to a superannuation fund or retirement savings account (RSA) during an income year for the purpose of providing superannuation benefits for themselves, or their dependants after their death.

However, the conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997 must all be satisfied before a 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 'Income Tax: superannuation contributions' (TR 2010/1).

Notice of intent to deduct conditions

One of these conditions, in section 290-170 of the ITAA 1997, is that the person making a contribution must provide a notice of intent to claim a deduction (the notice) to their superannuation fund.

In respect of the 2010-11 income year, that notice of intent must be given to the fund by the earlier of:

· 30 June 2012, or

· the day on which their 2010-11 income tax return is lodged.

Section 290-170 of the ITAA 1997 provides that a person wishing to claim a deduction must lodge the notice of intent with the fund to which they made the contribution. Consequently, your client can only give the notice to the trustee of Fund A.

Although your client rolled-over the benefits to Fund B, Fund B is not the fund who received the contribution and included the contributed amount as assessable income for the relevant year. Therefore, Fund B is unable to accept the notice from your client.

In this case, the residual balance of the pension account of your client's late spouse was transferred to your client's Fund A superannuation account in the 2010-11 income year. This death benefit payment was correctly treated as a contribution to your client's Fund A superannuation account. Your client subsequently intended to claim part of this contribution as a deduction in the 2010-11 income year.

Before lodging a notice of intention to claim a tax deduction, your client's benefits were transferred from Fund A to Fund B.

This transfer was a roll-over of those benefits from one fund to another. The roll-over would have been accompanied by a statement setting out the elements of the payment rolled into Fund B, and including the rolled-over amount as part of the tax-free component (that is, Fund A treated it as a non-concessional contribution).

Since your client is no longer a member of Fund A, the trustee of Fund A cannot accept any notices from your client. Once benefits have been paid out it is also too late for Fund A to alter the components of that roll-over payment. Accordingly, your client has not satisfied the notice requirement in paragraph 290-170(1)(c) of the ITAA 1997.

Discretion

Section 290-170 of the ITAA 1997 does not give to the Commissioner the power to exercise a discretion to allow a deduction where any of the requirements of this provision have not been satisfied, regardless of the reasons those requirements were not met, or the extent to which those reasons were beyond the taxpayer's control.

The Commissioner also has no discretion in the income tax legislation to allow a fund receiving a roll-over of superannuation monies to accept a notice in relation to contributions not made to that fund.