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Ruling

Subject: Deductibility of personal superannuation contributions

Question

Can your client claim a deduction for personal superannuation contributions for the 2012-2013 income year?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2013.

The scheme commences on:

1 July 2012.

Relevant facts and circumstances

Your client made personal superannuation contributions to their self managed superannuation fund during the 2012-13 income year.

Your client worked as an employee during the 2012-13 income year.

No superannuation guarantee payments were paid for your client's benefit as he was over 70 years of age and in accordance with paragraph 27(1)(a) of the Superannuation Guarantee (Administration) Act 1992, your client's employer is not required to include your client's salary or wages when calculating their superannuation guarantee liability.

Income received from the employment activities is more than 10% of your client's total assessable income, reportable fringe benefits and reportable employer superannuation contributions for the 2012-13 income year.

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 Subsection 290-150(2).

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

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.

Superannuation Guarantee (Administration) Act 1992 Section 12

Superannuation Guarantee (Administration) Act 1992 Subsection 12(9A)

Superannuation Guarantee (Administration) Act 1992 Subsection 12(11)

Reasons for decision

Summary

Your client is engaged in activities that would result in them being considered an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992. Accordingly, the maximum earnings as an employee condition applies.

Your client has not satisfied the maximum earnings as an employee condition. Your client's income from employment activities is not less than 10% of their assessable income, reportable fringe benefits and reportable employer superannuation contributions for the year. This means that your client will not be eligible to claim a deduction for the personal superannuation contributions made in the 2012-13 income year.

Detailed reasoning

Deduction for personal deductible superannuation contributions

A person must satisfy the conditions in section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) before they 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).

Subsection 290-150(2) of the ITAA 1997 provides that the conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997 must also be satisfied before a person can claim a deduction for the contributions made in that income year.

According to the facts, the conditions in section 290-160 have not been met.

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 the following must be attributable to those activities:

· their assessable income for the income year;

· their reportable fringe benefits (RFB) for the income year; and

· the total of their reportable employer superannuation contributions (RESC) for the income year.

Subsection 290-160(1) states:

This section applies if:

(a) in the income year in which you make the contribution, you engage in any of these activities:

(i) holding an office or appointment;

(ii) performing functions or appointment;

(iii) engaging in work;

(iv) doing acts or things; and

(b) 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 had not been enacted).

Based on the information provided, your client is considered an employee for the purposes of the SGAA during the 2012-2013 income year.

While it is noted that your client did not receive any superannuation guarantee due to section 27(1)(a) of the SGAA, an individual's receipt of superannuation guarantee is not relevant to the question of whether or not a person is an 'employee' for SGAA purposes. This is to be determined by reference to section 12 of the SGAA, which states that the term 'employee' is to have its ordinary meaning unless one of the limited exceptions in subsections 12(9A) and (11) apply.

As you have advised that your client worked as an employee during the income year, they will still be an employee for the purposes of the SGAA during the 2012-13 income year.

This means section 290-160 of the ITAA 1997 applies to your client in determining the deductibility of their personal superannuation contributions.

You have advised that the income relating to your client's employment activities represents more than 10% of the total of their assessable income, RFB and RESC for that year. As such, the maximum earnings as an employee condition of section 290-160 of the ITAA 1997 is not satisfied.

Accordingly, it is not necessary to determine whether the remaining deduction for personal superannuation conditions of 290-155, 290-165 and 290-170 of the ITAA 1997 have been satisfied.

Conclusion:

As not all of the conditions for deductibility under section 290-150 of the ITAA 1997 have been satisfied in relation to the 2012-13 income year, your client is not entitled to claim a deduction for the personal superannuation contributions made to their nominated superannuation fund in the 2012-13 income year.