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Ruling

Subject: Deduction for personal superannuation contributions

Question:

Is the personal superannuation contribution counted as a contribution made in the 2012-13 income year?

Answer:

Yes

This ruling applies for the following period

Year ending 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts

Your client is a member of a self managed superannuation fund (the Fund).

A personal contribution (Amount A) for your client was received by the Fund in the 2011-12 income year. Amount A was credited to your client's account in the Fund in the 2011-12 income year.

A personal contribution (Amount B) for your client was received by the Fund in the 2011-12 income year and allocated to an unallocated contributions account. Amount B was credited to your client's account in the Fund in the 2012-13 income year.

You state that Amount B was not allocated immediately to your client's account as there was some uncertainty as to how to the contribution was going to be treated. In addition, the governing rules of the Fund allow for this. Given the proximity to the end of the financial year at the time a decision was made to leave the contribution unallocated while your client and the trustees of the Fund obtained advice on the most appropriate way to deal with the contribution.

Relevant legislative provisions

Income Tax Assessment Act 1997  Section 292-25

Income Tax Assessment Act 1997  Subsection 292-25(2)

Income Tax Assessment Act 1997  Subsection 292-25(3)

Income Tax Assessment Act 1997 Section 290-150

Income Tax Assessment Regulation 1997  Regulation 292-25.01(2)

Income Tax Assessment Regulation 1997  Regulation 292-25.01(4)

Superannuation Industry (Supervision) Regulations 1994  Division 7.2

Superannuation Industry (Supervision) Regulations 1994  Subregulation 7.08(2)

Reasons for decision

Summary of decision

As the contribution Amount B is allocated to your client in the 2012-13 income year it is to be included as a concessional contribution in that year.

Further, provided that all conditions under section 290-150 of the ITAA 1997 are met in the 2012-13 income year your client will be entitled to claim a deduction in respect of the personal superannuation contribution made to Fund.

Detailed reasoning

A person can claim a deduction for personal contributions made to a superannuation fund for the purpose of providing superannuation benefits for themselves, (or their dependants after their death) under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997). A person can deduct the contribution only for the income year in which they made the contribution.

Personal contributions for which a tax deduction has been claimed are concessional contributions. We will now consider concessional contributions and the timing of a concessional contribution.

Subsection 292-25(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a contribution is a concessional contribution if it is made in the financial year to a complying superannuation plan 'in respect of you' and it is included in the assessable income of the superannuation provider. A contribution is made 'in respect of you' when it is made for the purpose of providing superannuation benefits for you. As indicated in paragraph 7 of Taxation Ruling TR 2010/1 Income tax: superannuation contributions this requires an objective determination of the contributor's purpose. Therefore, a contribution does not cease to be made to provide superannuation benefits for a particular person merely because the trustee does not immediately allocate it to the member.

Subsection 292-25(3) of the ITAA 1997 also includes in concessional contributions an amount allocated in accordance with the conditions specified in the regulations.

Subregulation 292-25.01(2) of the Income Tax Assessment Regulations 1997 (ITAR) provides that an amount is allocated in a way covered by subsection 292-25(3) of the ITAA 1997 if the amount has been allocated under Division 7.2 of the Superannuation Industry (Supervision) Regulations 1994 (SISR) and is an assessable contribution.

Division 7.2 of the SISR provides rules for the allocation of contributions to members. Subregulation 7.08(2) of the SISR requires a trustee who receives a contribution in a month in relation to an accumulation interest to allocate the contribution to a member of the fund:

· within 28 days after the end of the month; or

· if it is not reasonably practicable to allocate the contribution to the member of the fund within 28 days after the end of the month - within such longer period as is reasonable in the circumstances.

Subregulation 292-25.01(4) of the ITAR 1997 provides that amounts allocated from reserves are also treated as being allocated in a way covered by subsection 292-25(3) of the ITAA 1997 unless an exclusion in subregulation 292-25.01(4) of the ITAR 1997 applies. However, subregulation 292-25.01(4) of the ITAR 1997 does not apply to an amount that is covered by subregulation 292-25.01(2) of the ITAR 1997.

In this case as the personal contribution will be made in respect of your client subregulation 292-25.01(2) of the ITAR 1997 is the more specific regulation.

Where a contribution is made to a fund in respect of a particular member and is subsequently allocated to the member under Division 7.2 of SISR the application of the above provisions appears to result in the concessional contribution being counted as a concessional contribution twice:

· once under subsection 292-25(2) of the ITAA 1997 when the contribution is received by the fund; and

· a second time under subsection 292-25(3) of the ITAA 1997 when it is allocated to the member.

Case law provides that unless there is a clear intention to tax an amount twice, an interpretation should be adopted which avoids double taxing: Dixon J in Executor Trustee and Agency Company of South Australia Ltd v Federal Commissioner of Taxation (1932) 48 CLR 26.

Further, the Explanatory Statement to Income Tax Assessment Amendment Regulations 2007 (No. 3) which introduced regulation 292-25.01 of the ITAR shows there is a clear intention not to include a contribution in concessional contributions twice.

The Explanatory Statement to Income Tax Assessment Amendment Regulations 2007 (No. 3) states:

This approach will not result in double counting against the concessional contributions cap as contributions that are allocated directly to a reserve when made will only be counted against the contributions cap when allocated to a member.

It is considered the intent declared by this statement demonstrates that these contributions are intended to be included in concessional contributions when they are allocated under SISR.

In this case, your client is a member of a self managed superannuation fund (the Fund).

A personal contribution (Amount B) for your client was received by the Fund in the 2011-12 income year and allocated to an unallocated contributions account. Amount B was credited to your client's account in the Fund in the 2012-13 income year.

Consequently, as the contribution is allocated under SISR to your client in the 2012-13 income year it is to be included as a concessional contribution in that year.

Further, provided that all conditions under section 290-150 of the ITAA 1997 are met in the 2012-13 income year your client will be entitled to claim a deduction in respect of the personal superannuation contribution made to Fund.