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Edited version of private advice
Authorisation Number: 1012649084659
Ruling
Subject: Superannuation contributions
Question
Are the superannuation contributions made to your employee deductable under subdivision 290B of the Income Tax Assessment Act 1997?
Answer
Yes.
This ruling applies for the following period:
Year ended 30 June 2015
The scheme commenced on
1 July 2014
Relevant facts and circumstances
The business earns a profit before wages and employee superannuation contributions.
Your sole employee is presently X years of age and will be 75 years of age in 20XX.
The business will pay superannuation contributions for the employee up to the maximum allowable contributions for an individual in the year ending 30 June 20XX but not after the employee turns 75 years of age.
The business will continue to operate into the future and the profits will absorb any losses beyond 30 June 20XX.
Relevant legislative provisions
Income Tax Assessment Act 1997 subdivision 290B
Reasons for decision
Summary
In your case you are a corporate entity who intends to pay superannuation contributions for an employee up to the age of 75 years. Therefore the contributions you make will be deductable provided all the requirements of Subdivision 290B of the ITAA 1997 and the limitations of TR 2010/1 are met.
Contributions
Section 290-60 of the ITAA 1997 states you can deduct a contribution you make to a superannuation fund for the purpose of providing superannuation benefits for another person who is your employee when the contribution is made. However the contributions must be made for an employee, to a complying superannuation fund and on or before the day that is 28 days after the end of the month in which the employee turns 75.
Paragraphs 62 to 64 of Taxation Ruling TR 2010/1 Income tax: superannuation contributions (TR 2010/1) detail the scope of these contributions:
62. Where the person engages in any 'employment' activities in the income year a deduction can only be claimed where the sum of assessable income, reportable fringe benefits total, and (from 1 July 2009) reportable employer superannuation contributions attributable to the 'employment' activities is less than 10% of the total of the person's assessable income, reportable fringe benefits total and reportable employer superannuation contributions in the income year that the contribution is made.
63. Assessable income, reportable fringe benefits total and reportable employer superannuation contributions are to be given their statutory meaning. In this regard, a person's assessable income is usually a gross amount worked out ignoring expenses incurred in gaining the income. However, in some cases, such as partnership or trust income, the amount included in a person's assessable income is their share of the net partnership income or net trust income.
64. All amounts that are attributable to the 'employment' activity are taken into account as assessable income in the 10% test. These include:
• the salary or wages (as used in its ordinary meaning) from the activity;
• allowances and other payments earned by an employee;
• the other payments, such as commission, director's remuneration and contract payments, that are treated as salary or wages by section 11 of the SGAA for those persons who engage in an 'employment' activity in a capacity other than a common law employee;
• an employment termination payment received by a person in consequence of the termination of their employment; and
• workers' compensation and like payments made because of injury or illness received by a person while holding the employment, office or appointment the performance of which gave rise to the entitlement to the compensation payments.
In your case you are a corporate entity who intends to pay superannuation contributions for an employee up to the age of 75 years. Therefore the contributions you make will be deductable provided all the requirements of Subdivision 290B of the ITAA 1997 and the limitations of TR 2010/1 are met.
Losses
Section 36-1 of the ITAA 1997 explains that if you have more deductions for an income year than you have income, the difference is a tax loss which you may be able to deduct in a later income year.
Section 36-17 describes how a corporate tax entity is to deduct losses in later years.