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Ruling

Subject: Personal superannuation contributions

Questions

1. Were the personal superannuation contributions of $X made in the 2011-12 income year?

2. Were the personal superannuation contributions of $Y made in the 2011-12 income year?

Advice/Answers

No.

1. Yes.

This ruling applies for the following period

Year ended 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts

Your client is self employed.

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

Both your client's accounts and those of the Fund are held with the same banking group (the Bank).

Prior to 30 June 2012 your client sought professional advice to maximise your client's concessional contributions ($Y) and non-concessional contributions ($X).

In mid June 2012 your client provided instructions to the Bank to establish appropriate facilities for the contributions to be made prior to 30 June 2012.

In a letter, the Bank has confirmed that prior to 30 June 2012 the appropriate facilities were established.

The transfer of $Y was completed prior to 30 June 2012.

The Bank has advised that while the transfer of $X was initiated prior to 30 June 2012; it was not completed until after this date.

The reason for the delay of the transfer of $X was due to your client's online banking facility having a daily payment limit which prevented the immediate transfer of $X.

The transfer of $X was completed after 30 June 2012.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 290-150

Income Tax Assessment Act 1997 Subsection 290-150(3)

Summary of decision

Your client made a non-concessional superannuation contribution of $X on 29 June 2012 which was received by his superannuation fund after 30 June 2012. Your client also made a concessional superannuation contribution of $Y on 29 June 2012 which was received by your client's superannuation fund on the same date.

Therefore, the contribution of $X was not made in the 2011-12 income year but in the 2012-13 income year.

The contribution of $Y was made in the 2011-12 income year.

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).

While your question is about when a contribution is made and therefore not strictly about whether your client can claim a deduction for personal superannuation contributions, section 290-150 of the ITAA 1997 is still relevant.

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 in part:

(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.

…

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.

The legislation itself is quite specific. It allows a deduction, subject to the necessary requirements being met, only for the income year in which the contributions have been made. 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 are actually made in a later year of income.

In this case your client made a personal superannuation contribution of $Y prior to 30 June 2012 and the documentation provided by the Bank shows that the payment type is immediate. Therefore it was made in the 2011-12 income year.

On the other hand, the contribution of $X was received by the Fund after 30 June 2012 as advised by the Bank.

The reason for the delay as advised by the Bank is that was due to your client's online banking facility having a daily payment limit which prevented the immediate transfer of $X. As a result, the Fund received the contribution after 30 June 2012. Therefore this contribution was made in the 2012-13 financial year.