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Ruling

Subject: Personal superannuation contributions - validity of notice

Questions

1. Is your client entitled to a deduction, under subdivision 290-C of the Income Tax Assessment Act 1997 (ITAA 1997), for the contribution he made to his superannuation fund (the Fund) in the 2009-10 income year?

2. Is the letter your client sent to the Fund, in the 2009-10 income year, a valid notice in the approved form as required by section 290-170 of the ITAA 1997?

3. Is the 'Notice of intent to claim or vary a deduction for personal super contributions' (NAT 71121-04.2008) form your client sent to the Fund, in the 2010-11 income year, a valid notice in the approved form as required by section 290-170 of the ITAA 1997?

Advice/Answers

1. Yes.

2. Yes.

3. No.

This ruling applies for the following period

Year ending 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts

Your client made a contribution to his superannuation fund (the Fund), which is a complying superannuation fund, in the 2009-10 income year.

Your client intended to claim a tax deduction in relation to the contribution in the 2009-10 income year.

Your client was under age 65 when the contributions were made.

You have provided a copy of your client's individual tax return for the 2009-10 income year. The return shows that your client is engaged in activities that results in them being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA). The return shows your client's reported salary and wages is less than 10% of his total assessable income and reportable fringe benefits for the 2009-10 income year

The notice provided by your client to the Fund in the 2009-10 income year was given within the appropriate timeframe, before your client lodged his tax return and before the end of the next income year, and while he was still a member of the Fund.

Your client's notice provided in the 2009-10 income year contains the majority of the information requested on the NAT 71121-04.2008 form with the exception of statements in 'Section D: (Declaration)'.

Your client rolled over his entire superannuation benefit with the Fund to another superannuation fund in the 2009-10 income year. At this time your client had not received any acknowledgment from the Fund of his intention to claim a tax deduction in respect of his contribution.

Your client has been negotiating with the Fund regarding the validity of his notice and the acknowledgment of the notice.

The Fund have refused to acknowledge the notice provided in the 2009-10 income year as a valid notice in the approved form, as required by section 290-170 of the Income Tax Assessment Act 1997.

In the 2010-11 income year your client sent a completed 'Notice of intent to claim or vary a deduction for personal super contributions' (NAT 71121-04.2008) form to the Fund.

Your client was not a member of the Fund, nor did the Fund hold the contribution when he lodged the notice provided in the 2010-11 income year.

Your client has lodged a complaint with the Superannuation Complaints Tribunal in regards to the issue.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 290-150.

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 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.

Reasons for decision

Summary of decision

Provided that your client now receives an acknowledgement from his superannuation fund (the Fund) all conditions will be satisfied and your client will be entitled to claim a deduction for the personal superannuation contribution made to the complying superannuation fund in the 2009-10 income year.

Please note that the deduction your client claims cannot add to or create a loss.

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). Section 290-150 of the ITAA 1997 sets out that the conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997 must also be satisfied for the person to claim the deduction.

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 the contribution is made.

In this case, your client has made personal superannuation contributions to his superannuation fund (the Fund), which is a complying superannuation fund. Therefore, this requirement is satisfied.

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:

· in the income year in which you make the contribution, you engage in any of these activities:

· holding an office or appointment;

· performing functions or appointment;

· engaging in work;

· doing acts or things; and

· 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, you have provided a copy of your client's individual tax return for the 2009-10 income year. The return shows that your client is engaged in activities that results in them being treated as an employee for the purposes of the SGAA.

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 that employment must be less than 10% of their total assessable income and reportable fringe benefits for the 2011-12 income year.

In this case the return shows your client's reported salary and wages is less than 10% of their total assessable income and reportable fringe benefits for the 2009-10 income year. Consequently, section 290-160 of the ITAA 1997 will be 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.

Your client was under age 65 when the contributions were made, therefore, this requirement is satisfied.

Notice of intent to deduct conditions:

Section 290-170 of the ITAA 1997 deals with the notice of intent to deduct contributions and states:

To deduct the contribution, or a part of the contribution:

· you must give to the trustee of the fund or the RSA provider a valid notice, in the approved form, of your intention to claim the deduction; and

· the notice must be given before:

· if you have lodged your income tax return for the income year in which the contribution was made on a day before the end of the next income year - the end of that day; or

· otherwise - the end of the next income year; and

· the trustee or provider must have given you an acknowledgment of receipt of the notice.

The notice is not valid if at least one of these conditions is satisfied:

· the notice is not in respect of the contribution;

· the notice includes all or a part of an amount covered by a previous notice;

· when you gave the notice:

· you were not a member of the fund or the holder of the RSA; or

· the trustee or RSA provider no longer holds the contribution; or

· the trustee or RSA provider has begun to pay a superannuation income stream based in whole or part on the contribution;

· before you gave the notice:

· you had made a contributions-splitting application (within the meaning given by the regulations) in relation to the contribution; and

· the trustee or RSA provider to which you made the application had not rejected the application.

The trustee or provider must, without delay, give you an acknowledgment of a valid notice, subject to subsection (4).

The trustee or provider may refuse to give you an acknowledgment of receipt of a valid notice if the value of the superannuation interest to which the notice relates, at the end of the day on which the trustee or RSA provider received the notice, is less than the tax that would be payable in respect of your contribution (or part of the contribution) if the trustee or provider were to acknowledge receipt of the notice.

This section provides that in order to deduct the contribution, you must give the trustee of the fund a valid notice in the approved form of your intention to claim the deduction. This condition has two considerations:

· whether the notice is valid; and

· whether the notice was in the approved form.

Furthermore, the notice must be given either before you lodge your income tax return, or if you have not yet lodged your income tax return before the end of the year following the year the contributions were made.

Subsection 290-170(3) of the ITAA 1997 provides that the trustee must, without delay, give you an acknowledgement of a valid notice. A trustee may refuse to give acknowledgment of receipt of a valid notice in the circumstances described in subsection 290-170(4) of the ITAA 1997. In this situation, the Fund has not yet issued this acknowledgment.

'Valid notice' is not a defined term in the ITAA 1997. However, subsection 290-170(2) of the ITAA 1997 specifically states circumstances where a notice is not valid. These are:

· where it is not in respect of the contribution,

· where the notice includes all or a part of an amount covered by a previous notice,

· where you were not a member of the fund when you gave the notice,

· where the trustee no longer holds the contribution,

· where the trustee has begun to pay a superannuation income stream; or

· where, before you gave the notice, you made a contributions splitting application.

Taxation Ruling TR 2010/1 entitled 'Income Tax: Superannuation contributions' (TR 2010/1) sets out the Commissioner's view on deductions for personal superannuation contributions only discusses when a notice will be invalid and not when one will be valid. Therefore, it is assumed that if a notice does not fall into one of these categories, that is to be 'not valid', it is a valid notice.

Section 995-1 of the ITAA 1997 defines 'approved form' to have the meaning given by section 388-50 in Schedule 1 to the Taxation Administration Act 1953 (TAA). Section 388-50 of the TAA states:

(1) A return, notice, statement, application or other document under a taxation law is in the approved form if, and only if:

· it is in the form approved in writing by the Commissioner for that kind of return, notice, statement, application or other document; and

· it contains a declaration signed by a person or persons as the form requires (see section 388-75); and

· it contains the information that the form requires, and any further information, statement or document as the Commissioner requires, whether in the form or otherwise; and

· for a return, notice, statement, application or document that is required to be given to the Commissioner - it is given in the manner that the Commissioner requires (which may include electronically).

(1A) Despite subsection (1), a document that satisfies paragraphs (1)(a), (b) and (d) but not paragraph (1)(c) is also in the approved form if it contains the information required by the Commissioner. The Commissioner must specify the requirement in writing.

Note from the above that the Commissioner must approve requirements in relation to a specific approved form in writing. The Commissioner can do this in the form of an 'Instrument of Approval' that accompanies the publishing of an approved form. The Commissioner's view on the production and content of Instruments of Approval is contained in Law Administration Practice Statement PS LA 2005/19 (PS LA 2005/19).

The Commissioner has produced an approved form which can be used by superannuation fund members to advise their superannuation fund of their intention to claim a deduction for personal superannuation contributions. This form is the 'Notice of intent to claim or vary a deduction for personal super contributions' (NAT 71121-04.2008). The superannuation fund member does not have to use this form, and can inform their superannuation fund of their intention in other ways, such as on a 'fund-branded' form or by providing their own letter/notice to the fund. The question which arises is whether such other notices are in the approved form for the purposes of satisfying section 290-170 of the ITAA 1997.

The notice provided by your client to the Fund in the 2009-10 income year was given within the appropriate timeframe, before your client lodged his tax return and before the end of the next income year, and while they were still a member of the fund. In addition, none of the other reasons for the notice to be 'not valid' were present at that time. As such, this notice is a valid notice.

The above notice, while providing relevant identifying information and clearly outlining your client's intent to deduct and which part of the contribution he intended to claim a deduction for, does not contain all of the information requested on the NAT 71121-04.2008 form. Therefore the question has been raised as to whether this notice was in the 'approved form'.

Section 25C of the Acts Interpretation Act 1901 (AIA) applies where a legislative provision prescribes a form to be used and states:

Where an Act prescribes a form, then strict compliance with the form is not required and substantial compliance is sufficient.

As described above, the notice to be provided under section 290-170 of the ITAA 1997 must be in the approved form. Section 25C of the AIA applies to the approved form regime in the taxation legislation. As such, the above test of substantial compliance applies to notices given under section 290-170 of the ITAA 1997.

Your client's notice provided in the 2009-10 income year contains the majority of the information requested on the NAT 71121-04.2008 form with the exception of statements in 'Section D: (Declaration)'. The statements mostly relate to the validity questions. The statements only relate to the member's declarations of validity and do not affect whether the notice was in the approved form.

As such, it can be concluded here that the notice provided in the 2009-10 income year was, substantially, in the approved form.

From the above, your client's notice provided in the 2009-10 income year was both valid and, substantially, in the approved form and given to the Fund within the specified timeframe. Therefore, the Fund is able to acknowledge this notice and section 290-170 of the ITAA 1997 will be satisfied when your client receives the acknowledgement from the Fund under paragraph 290-170(1)(c) of the ITAA 1997.

Please note the notice provided in the 2010-11 income year was on the NAT 71121-04.2008 form. As such, this notice was 'in the approved form'. However, paragraph 290-170(2)(c) of the ITAA 1997 specifically provides that the notice is not valid if when you gave the notice you were not a member of the fund or the trustee no longer holds the contribution.

Your client rolled over his entire superannuation benefit with the Fund to another superannuation fund in the 2009-10 income year. Therefore, your client was not a member of the Fund, nor did the Fund hold the contribution when he lodged the notice provided in the 2010-11 income year. Hence, the notice provided in the 2010-11 income year is not a valid notice.

Conclusion:

Provided that your client now receives an acknowledgement from the Fund all conditions under section 290-150 of the ITAA 1997 will be satisfied and your client will be entitled to claim a deduction for the personal superannuation contribution made to the complying superannuation fund in the 2009-10 income year.

Please note the deduction your client claims under section 290-150 of the ITAA 1997 cannot add to or create a loss.