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Ruling

Subject: Deductibility of employer superannuation contributions

Question

Is the employer entitled to claim a tax deduction in the 2011-12 income year under section 290-60 of the Income Tax Assessment Act 1997 (ITAA 1997) for a superannuation contribution intended to be made to the fund in the 2011-12 income year but due to a mistake by the bank was credited to the employer's bank account?

Advice/Answer

No.

This ruling applies for the following period

For the year ended 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts and circumstances

In the fourth quarter of the 2011-12 income year, a director of a company (the Company) attended a bank (the Bank) and made a cheque deposit to be transferred and made payable to a superannuation fund (the Fund).

The Company intended the deposited amount to be treated as employer superannuation contributions to be made to the Fund and for the Company to claim the contributions as a tax deduction for the 2011-12 income year.

In the first quarter of the 2012-13 income year, an error was noticed when the Bank issued their quarterly statement to the Fund.

A representative of the Bank confirmed that the incorrect transfer was brought to the Bank's attention in the first quarter of the 2012-13 income year when the director of the Company contacted them to seek rectification.

Due to the Bank staff error, the cheque was debited from the Company account and then credited back to the same account. As such, the monies were not credited to the Fund's account.

Due to system limitations, the Bank was unable to backdate the deposit to the Fund for the original date which was for the previous financial year.

Pending clarification of the situation, the Company has not yet authorised the Bank to transfer the amount to the Fund.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 290-60

Income Tax Assessment Act 1997 Subsection 290-60(3)

Income Tax Assessment Act 1997 Subsection 290-60(4)

Income Tax Assessment Act 1997 Section 290-70

Income Tax Assessment Act 1997 Section 290-75

Income Tax Assessment Act 1997 Section 290-80

Summary

The Company is not entitled to claim a deduction for employer superannuation contributions for the 2011-12 income year as the contributions were not made to the Fund in that year of income.

Detailed reasoning

Deduction for employer contributions to a superannuation fund

The operative provisions dealing with the deductibility of contributions to a superannuation fund for the benefit of an employee are contained in subdivision 290-B of Division 290 of the Income Tax Assessment Act 1997 (ITAA 1997).

An entity is entitled to claim a tax deduction in respect of all superannuation contributions under section 290-60 of the ITAA 1997 if:

· the contribution is made to a superannuation fund or a retirement savings account (RSA);

· the contribution is made for the purpose of providing superannuation benefits for another person who is an employee of the entity when the contribution is made; and

· the conditions in sections 290-70, 290-75 and 290-80 of the ITAA 1997 are also satisfied.

Subsection 290-60(3) of the ITAA 1997 states that the deduction can only be claimed in respect of the income year in which the employer made the superannuation contribution.

This means that provided the entity made a superannuation contribution to a complying superannuation fund they will be able to claim a deduction for the financial year in which they made the contribution under section 290-60 of the ITAA 1997.

Further, a deduction cannot be claimed in respect of a contribution if it is an amount paid by the entity, as mentioned in regulations under the Family Law Act 1975, to a regulated superannuation fund (within the meaning of that Act) or to an RSA, to be held for the benefit of a non-member spouse of the entity in satisfaction of his or her entitlement in respect of the superannuation interest concerned (subsection 290-60(4) of the ITAA 1997).

In the present case, a deductible superannuation contribution was intended to be made from the Company's bank account to a superannuation fund (the Fund) for the 2011-12 income year. However, due to an error by a bank (the Bank), the contribution was made from the Company's bank account and then incorrectly credited back to the same account.

The bank error was not noticed until the 2012-13 income year when the Fund received their quarterly statement.

However, subsection 290-60(3) of the ITAA 1997 provides that a deduction can only be claimed in respect of the year of income in which the contribution is made.

As the contribution was not made to the Fund in the 2011-12 income year, the Company is not entitled to claim a deduction for the superannuation contribution in that income year.

In Taxation Ruling TR 2010/1 the Commissioner of Taxation has provided his view on when a contribution is made.

At paragraph 183 of TR 2010/1 it states:

· 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.

Furthermore, at paragraph 184 of TR 2010/1 it states:

· 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.

The legislation itself is quite specific. It requires that a contribution be made in the relevant year of income to a superannuation fund and, subject to the necessary requirements being met, a deduction will be allowed for that year of income. It does not contain a discretion that can be exercised by the Commissioner to allow a deduction for the relevant year of income where the contributions were not made until a later year of income.

In view of the above, the employer superannuation contributions were not made to the Fund in the 2011-12 income year, therefore the Company is not entitled to claim a deduction for employer superannuation contributions under section 290-60 of the ITAA 1997 for that income year.