Edited version of your private ruling

Authorisation Number: 1012459213082

Ruling

Subject: Timing of personal superannuation contributions

Question 1

Were the personal superannuation contributions of $X made to the Fund in the 2012 income year?

Answer 1

Yes.

Question 2

Were the personal superannuation contributions of $Y made to the Fund in the 2012 income year?

Answer 2

No.

This ruling applies for the following period:

1 July 2011 to 30 June 2013.

The scheme commences on:

1 July 2011.

Relevant facts and circumstances

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

The bank account of the Fund is held with the XYZ Bank (XYZ).

Your client processed the following electronic fund transfers from their personal accounts to the bank account of the Fund on 30 June:

The bank statements of the Fund record these amounts as received by the Fund on 2 July (the next business day).

The bank account of the Fund is a linked bank account of your client's XYZ bank account.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 290-150.

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

Reasons for decision

Summary

As the contribution of $X was received by the superannuation fund in the 2012 income year, this contribution must be included in the superannuation fund's assessable income for the 2012 income year.

As the contribution of $Y was received by the superannuation fund in the 2013 income year, this contribution must be included in the superannuation fund's assessable income for the 2013 income year.

Detailed reasoning

Year of receipt of the contribution

In respect of a deduction allowable to a person for their personal superannuation contributions, the relevant year of income is the year in which the contribution is received by the fund.

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

The Commissioner considers that a superannuation contribution is made when the capital of a superannuation fund is increased. Paragraph 12 of TR 2010/1 states:

A superannuation fund's capital is most commonly increased by transferring funds to the superannuation provider and, as a general rule, the contribution will be made when the funds are received by the superannuation provider.

Of particular note to this case is the relevant year of income of superannuation contributions made via an electronic funds transfer. In relation to this, the Commissioner states at paragraph 183 to 186 of TR 2010/1 that:

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.

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.

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.

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.

Thus, while a payment may have been set up for processing, if the payment has not been credited to the bank account of the superannuation provider, a contribution will not have been taken to be made. In accordance this, the Commissioner has noted in paragraph 187 that:

A superannuation provider's account statement would normally provide the best evidence as to when a contribution is received. However, in limited circumstances, other evidence may be used to determine when a contribution is made. For example, a transfer of funds between the linked accounts of a member of a self-managed superannuation fund and the fund held at the same financial institution may result in a contemporaneous debit and credit to the respective accounts with the funds being immediately available for use of the self-managed superannuation fund. When such a transfer occurs on a week-end, it is common for bank statements to show the transaction occurring on the next business day. Evidence, such as a computer print-out recording the receipt of the amount into an account of the superannuation provider, may be used to establish the timing of the contribution.

From the above, it is evident that whether a superannuation contribution has been made is a question of fact. The intention of the payer for a payment to be made on or before the end of an income year is not a relevant consideration. What is relevant is whether or not the contributions were received by the trustee of the superannuation fund by the end of the income year in question. For an electronic fund transfer to a superannuation provider, the amount has been received when it has been credited to the superannuation provider's account.

As noted in the facts, your client processed the following electronic fund transfers from their personal accounts to the Fund bank account on 30 June:

These amounts were recorded as received by the Fund on 2 July. Furthermore, you have advised that the bank account of the Fund is also held with the XYZ Bank, and linked to your client's XYZ bank account.

According to the payments and transfers policy of the XYZ Bank, transfers for linked XYZ accounts will be deposited into the payee's account immediately, regardless of whether the payment is submitted on a weekend, public holiday or a business day.

As your client's XYZ account and the Fund bank accounts are linked, it is accepted that the electronic funds transfer of $X was deposited immediately and received by the bank account of the Fund on 30 June. The documentation you have provided show that the funds for this contribution were immediately in control of, and accessible to, the bank account of the Fund the instant that the electronic transfer of these funds was performed by the XYZ. A corresponding reduction in the balance of funds in the XYZ bank account was also evident. This is despite the fact that the transaction on the Fund's bank account statement was dated on the next ordinary business day (2 July). Consequently, the relevant year of income in which the contribution of $X was received by the fund is the 2012 income year.

With respect to the contribution of $Y, the transfer and payment policy of ZZZ Bank provides that fund transfers made to another financial institution in Australia will normally be credited into the payee's account within two business days. If a transfer is made on a weekend or public holiday, the amount will be processed on the following ordinary business day.

Your client made a transfer of $Y on 30 June (a non-business day). As noted above, a contribution will not have been taken to be made until it is received by the bank account of the superannuation provider. The payment of $Y was recorded as received by the bank account of the Fund on the 2 July (the next business day). Unlike the payment of $X, there is no evidence that suggests that the contribution was received by the superannuation Fund at an earlier time, or that the funds were immediately in the control of, and accessible to, the bank account of the Fund on 30 June.

While it is noted that your client's computer print-out receipt shows that the 'Payment Timing' of the $Y transfer was 'Immediate 30 June', this does not mean that the funds were credited to the bank account of the Fund on 30 June. As noted above in paragraph 186 of TR 2010/1, most small payments between institutions are not processed in real time but are subject to deferred net settlement which occurs overnight. This deferred net settlement often means that while payment instructions may have been accepted for processing by an institution, funds may not be credited to the bank account of the payee until a later date. It is for this reason, ZZZ Bank advises customers that funds transfers made to another financial institution will take at least two working days. Accordingly, the 'immediate' payment timing status of the $Y funds transfer is simply indicative of the fact that your client's payment instructions had been accepted for processing. It did not mean that the funds had been deposited into the payee account (the Fund account). Consequently, as the contribution of $Y has been received by the Fund on 2 July, the relevant year of income is the 2013 income year.

Conclusion

The contribution of $X has been received by the superannuation fund in the 2012 income year. As such, it must be included in the superannuation fund's assessable income for the 2012 income year.

The contribution of $Y has been received by the superannuation fund in the 2013 income year. As such, it must be included in the superannuation fund's assessable income for the 2013 income year.