Edited version of administratively binding advice

Authorisation Number: 1012488600546

Advice

Subject: Concessional and non-concessional contributions

Questions

1. Are you able to make personal superannuation contributions up to the concessional contributions cap of $25,000 in the 2013-14 income year?

2. Are you able to make personal superannuation contributions up to the non-concessional contributions cap of $150,000 in the 2013-14 income year?

3. Will the 'bring forward' provision under subsection 292-85(4) of the ITAA 1997 be triggered where a contribution in excess of the non-concessional cap is made in the 2013-14 income year?

Advice/Answers

4. No, unless you satisfy the maximum earnings as an employee condition in that income year.

5. Yes.

6. Yes.

This ruling applies for the following periods

2013-14 income year

The scheme commenced on

1 July 2013

Relevant facts

You are currently under 65 years of age.

You are currently working for a State Government department.

Your estimated income from all sources for the 2013-14 income year exceeds $50,000.

You are a member of a complying superannuation fund.

You intend to contribute a part of the lump sum payment received from your overseas pension fund in the 2013-14 income year.

You stated that you do not make any personal contributions to a superannuation fund as part of your employment.

Assumptions

None.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 290-150.

Income Tax Assessment Act 1997 Section 290-155.

Income Tax Assessment Act 1997 Section 292-15.

Income Tax Assessment Act 1997 Section 292-80.

Income Tax Assessment Act 1997 Section 292-85.

Income Tax Assessment Act 1997 Subsection 295-95(2)

Income Tax Assessment Act 1997 Subsection 995-1(1)

Superannuation (Excess Non-concessional Contributions Tax) Act 2007 Section 4.

Superannuation (Excess Non-concessional Contributions Tax) Act 2007 Section 5.

Superannuation Industry (Supervision) Regulations 1994 Subregulation 1.03(1).

Superannuation Industry (Supervision) Regulations 1994 Subregulation 7.04(1).

Reasons for decision

Summary of decision

You will only be allowed to contribute up to the concessional contributions cap of $25,000 in the 2013-14 income year provided that you can claim a tax deduction for that contribution.

You are able to make personal superannuation contributions up to the non-concessional contributions cap of $150,000 in the 2013-14 income year provided that you do not claim a deduction for the contribution.

The 'bring forward' provisions may be triggered where a contribution in excess of the non-concessional cap is made in the 2013-14 income year.

Detailed reasoning

Concessional contributions

Concessional contributions include employer contributions, salary sacrifice contributions and personal contributions claimed as a tax deduction by a self-employed person.

Concessional contributions made to superannuation funds are subject to an annual cap. For the 2013-14 income year the annual cap is $25,000.

A person will be taxed on concessional contributions over the cap at a rate of 31.5% (section 292-15 of the ITAA 1997 and sections 4 and 5 of the Superannuation (Excess Concessional Contributions Tax) Act 2007).

If a person has more than one fund, all concessional contributions made to all their funds are added together and count towards the cap.

Amounts in excess of the concessional contributions cap are also counted towards the non-concessional contributions cap.

In this case, you intend to contribute a part of the lump sum payment from your overseas pension fund into your complying Australia superannuation fund in the 2013-14 income year.

You will only be allowed to contribute up to the concessional contributions cap of $25,000 in the 2013-14 income year provided that you can claim a tax deduction for that contribution.

Deduction for personal 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). However, the conditions in sections 290-155, 290-160, 290-165 and 290-170 of the ITAA 1997 must also be satisfied for the person to claim the deduction.

Complying superannuation fund condition

The condition in section 290-155 of the ITAA 1997 requires that where the contribution is made to a superannuation fund, it must be made to a complying superannuation fund for the income year of the fund in which the contribution is made.

As you intend to contribute a part of the lump sum payment from your overseas pension fund into your Australian complying fund which is a complying superannuation fund, therefore, this condition is satisfied.

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 their assessable income and reportable fringe benefits must be attributable to those activities. 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 has not been enacted).

Subsection 12(1) of the SGAA states that the terms employer and employee have their ordinary meaning. Subsections 12(2) to (11) of the SGAA expand the meaning of those terms and make provision to avoid doubt as to the status of certain persons.

Taxation Ruling TR 2010/1 entitled 'Income Tax: superannuation contributions' (TR 2010/1) explains the Commissioner's view on the rules that apply if a personal contribution is to be deducted. In regards to whether a person is an employee for the purposes of the SGAA TR 2010/1 states at paragraph 59:

A person will be engaged in an 'employment' activity if they are engaged in an activity in the income year that results in them being treated as an employee for the purposes of the SGAA. The term 'engaged' is not defined and takes its ordinary meaning. One of several meanings given to engaged is 'busy or occupied; involved'. Another meaning is 'under an engagement' where the ordinary meaning of 'engagement' is given as 'under an obligation or agreement'.

Where section 290-160 of the ITAA 1997 applies to a person, subsection 290-160(2) of the ITAA 1997 states that:

To deduct the contribution, less than 10% of the total of the following must be attributable to the activities:

(a) your assessable income for the income year;

(b) your reportable fringe benefits total for the income year;

(c) the total of your reportable employer superannuation contributions for the income year.

This test, also known as the 10% rule, means that in order to satisfy the condition set out under section 290-160 of the ITAA 1997, your total assessable income, reportable employer superannuation contributions and reportable fringe benefits attributable to employment must be less than 10% of their total assessable income, reportable employer superannuation contributions and reportable fringe benefits for the 2013-14 income year.

In regards to assessable income paragraph 254 of TR 2010/1 states:

For an individual, assessable income includes, for example, salary and wages, gross business income as a sole trader, gross rent from a solely owned property, interest, dividends and franking credits. If an individual is a partner in a partnership their share of the net income of the partnership, as determined under Division 5 of Part III of the ITAA 1936, is included in their assessable income. ...

This means that a person's income which they earned from work performed as an employee must be less than 10% of their total assessable income for the 2013-14 income year for the condition under section 290-160 of the ITAA 1997 to be satisfied.

In this case, you provided your estimated total assessable income from all sources in the 2013-14 income year. As you are currently working for the Australian Government, you are unlikely to satisfy the maximum earnings as an employee test as it is unlikely that your total assessable income, reportable employer superannuation contributions and reportable fringe benefits attributable to employment will be less10% of your estimated total assessable income, reportable employer superannuation contributions and reportable fringe benefits for the 2013-14 income year).

Therefore, it is unlikely that this condition will be satisfied.

Age-related conditions

Under subsection 290-165(2) of the ITAA 1997 the ability to claim a deduction ceases for contributions that are made after 28 days from the end of the month in which the person making the contribution turns 75 years of age.

Notice of intent to deduct conditions

Section 290-170 of the ITAA 1997 requires a person to provide a valid notice of their intention to claim the deduction to the trustee of their superannuation fund. The notice must be given before the earlier of:

· the date you lodge your income tax return for the income year in which the contribution was made; or

· the end of the income year following the year in which the contribution was made.

In addition, you must also have been given an acknowledgement of the notice by the trustee of the superannuation fund.

A notice will be valid as long as the following conditions apply:

· the notice is in respect of the contributions;

· the notice is not for an amount covered by a previous notice;

· at the time when the notice is given:

- you are a member of the fund or the holder of the retirement savings account (RSA);

- the trustee or RSA provider holds the contribution (for example, a notice will not be valid if a partial roll-over of the superannuation benefit which includes the contribution covered in the notice has been made);

- the trustee or RSA provider has not begun to pay a superannuation income stream based on the contribution; or

· before the notice is given:

- a contributions splitting application has not been made in relation to the contribution; and;

- the trustee or RSA provider has not rejected the application.

Therefore, to satisfy this condition, you will need to lodge a valid notice with the trustee of the Fund and received an acknowledgment of that notice in the year that you make the proposed contribution.

As it is unlikely that you will satisfy the maximum earnings as an employee condition in the 2013-14 income year, therefore you will not be able to make personal superannuation contributions up to the concessional contributions cap of $25,000 in the 2013-14 income year.

Non-concessional contributions cap

Non-concessional contributions include:

· personal contributions for which an income tax deduction is not claimed;

· contributions a person's spouse makes to their superannuation fund account; and

· transfers from foreign superannuation funds (excluding amounts included in the fund's assessable income).

Some contributions are specifically excluded from being non-concessional contributions. These include:

· a Government co-contribution;

· a contribution arising from a structured settlement or an order for personal injury;

· a contribution relating to some capital gains tax (CGT) small business concessions to the extent that it does not exceed the CGT cap amount ($1,000,000 indexed annually) when it is made; and

· a roll-over superannuation benefit.

Non-concessional contributions made to a complying superannuation fund will be subject to an annual cap (subsection 292-85(2) of the Income Tax Assessment Act 1997 (ITAA 1997)). For a person who is 50 years of age or more their non-concessional contributions cap for the 2011-12 income year is $150,000.

A taxpayer will be taxed on non-concessional contributions over the cap at the rate of 46.5% (section 292-80 of the ITAA 1997).

In this case, you intend to contribute a part of the lump sum payment from your overseas pension fund into your complying Australian superannuation fund in the 2013-14 income year. Given that it is unlikely that you will be able to claim a deduction for this personal superannuation contribution, therefore, any monies contributed will count towards your non-concessional contributions cap of $150,000 in the 2013-14 income year.

The Bring Forward Provisions

For a person who is 50 years of age or more their transitional concessional contribution cap for the 2013-14 income year is $25,000, and their non-concessional contributions cap is $150,000.

However, subsections 292-85(3) and (4) of the ITAA 1997 ('the bring-forward provisions') provide that the non-concessional contributions cap is calculated differently if certain conditions are satisfied.

Subsection 292-85(3) of the ITAA 1997 states:

However, subsection (4) applies instead of subsection (2) in determining your non-concessional contributions cap for a financial year (the first year) if:

· your non-concessional contributions for the first year exceed the amount mentioned in subsection (2) for that year; and

· you are under 65 years at any time in the first year; and

· a previous operation of subsection (4) does not determine your non-concessional contributions cap for the first year.

Therefore, a person who is under age 65 at any time during an income year is able to 'bring forward' future entitlements equal to two years worth of non-concessional contributions. This means a person under age 65 in the 2011-12 and 2012-13 income years is able to contribute non-concessional contributions totalling $450,000 over three income years without exceeding their non-concessional contributions cap as per subsections 292-85(3) and (4) of the ITAA 1997.

Conditions of Accepting Contributions

Whether a regulated superannuation fund is able to accept contributions is determined under the Superannuation Industry (Supervision) Act 1993 (SISA) and the Superannuation Industry (Supervision) Regulations 1994 (SISR).

Subregulation 7.04(1) of the SISR deals with the acceptance of contributions by regulated superannuation funds. This subregulation states:

A regulated superannuation fund may accept contributions only in accordance with the following table and subregulations (2), (3), (4) and (6).

Item	If the member	The fund may accept
1	is under 65	contributions that are made in respect of the member
2	is not under 65, but is under 70	contributions that are made in respect of the member that are: (a) mandated employer contributions; or (b) if the member has been gainfully employed on at least a part-time basis during the financial year in which the contributions are made: (i) employer contributions (except mandated employer contributions); or (ii) member contributions
3	is not under 70, but is under 75	contributions that are made in respect of the member that are: (a) mandated employer contributions; or (b) if the member has been gainfully employed on at least a part-time basis during the financial year in which the contributions are made - contributions received on or before the day that is 28 days after the end of the month in which the member turns 75 that are: (i) employer contributions (except mandated employer contributions); or (ii) member contributions made by the member
4	is not under 75	mandated employer contributions

Therefore, once a member turns 65 years of age and is below the age of 70, the fund can only accept a member contribution from them if they satisfy the work test.