Edited version of private advice

Authorisation Number: 1012650356788

Ruling

Subject: Deductibility of personal superannuation contribution

Question

Will a personal contribution of to the amount of X you make to your superannuation fund in the 2013-14 income year be considered tax deductible?

Answer

No

This ruling applies for the following period

Income year ending 30 June 2014

The scheme commenced on

1 July 2013

Relevant facts and circumstances

1. You were an employee of the Employer for X weeks in the 2013-14 income year.

2. You state that the Employer paid you salary in the 2013-14 income year before your employment ceased.

3. You have received other payments in the 2013-14 income year due to the cessation of your employment including:

• Annual leave loading

• Annual leave

• Long service leave

• Public holiday

• Redundancy (no tax)

• Severance employment termination payment

4. You also have received overseas income.

5. You wish to make a personal contribution of X to your superannuation fund in the 2013-14 income year

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 26-55(2).

Income Tax Assessment Act 1997 Section 290-150.

Income Tax Assessment Act 1997 Subsection 290-150(2).

Income Tax Assessment Act 1997 Section 290-155.

Income Tax Assessment Act 1997 Section 290-160.

Income Tax Assessment Act 1997 Subsection 290-160(1).

Income Tax Assessment Act 1997 Paragraph 290-160(1)(a).

Income Tax Assessment Act 1997 Paragraph 290-160(1)(b).

Income Tax Assessment Act 1997 Subsection 290-160(2).

Income Tax Assessment Act 1997 Section 290-165.

Income Tax Assessment Act 1997 Subsection 290-165(2).

Income Tax Assessment Act 1997 Subsection 290-170.

Superannuation Guarantee (Administration) Act 1992 Section 11

Reasons for decision

Summary

As your income attributable to employment activity exceeds 10% of your total assessable income in the 2013-14 income year, you have not met one of the conditions specified in section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997). As a result you are not entitled to a deduction if you decided to make a personal contribution of X to your superannuation fund.

Detailed reasoning

1. A person can claim a deduction for a personal superannuation contribution made to a complying superannuation fund or retirement savings account (RSA), for the purpose of providing superannuation benefits for themselves under section 290-150 of the ITAA 1997.

2. However, section 290-150(2) of the ITAA 1997 provides that the conditions in sections 290-155, 290-160 (if applicable), 290-165 and 290-170 of the ITAA 1997 must all be satisfied before the person can claim a deduction for the contributions made in that income year. These conditions are:

• Where applicable, you must not exceed the 'maximum earnings as employee condition'.

• Where the contribution is made to a superannuation fund, the fund must be complying in the financial year that the contribution was made.

• You must satisfy the age related conditions.

• You must have given a valid notice of intent to the superannuation fund or RSA provider in the approved form by the required time and received acknowledgment from the fund.

Maximum earnings as employee condition

3. Section 290-160 of the ITAA 1997 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 duties;

(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 (SGAA 1992) (assuming that subsection 12(11) of that Act had not been enacted).

4. According to section 290-160(2) of the ITAA 1997, in order for the personal superannuation contribution to be tax deductible, income attributable to employment activities must be less than 10% of the total of the following:

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.

5. As you were an employee of the Employer for X weeks in 2013, section 290-160 of the ITAA 1997 applies to you. When you have income that is attributable to employment activity, the amount you earn from that activity must be less than 10% of your combined assessable income, total reportable superannuation contributions and reportable fringe benefits for that financial year. This is the case regardless of whether or not your employer has paid superannuation on your behalf.

Meeting the maximum earnings condition

6. You have provided your pay summary from the Employer outlining various payments you have received as a result of the cessation of your employment, including payments for annual leave loading, annual leave pre-1993, long service leave, public holiday, redundancy and a severance employment termination payment.

7. Paragraph 64 of Taxation Ruling 2010/1 entitled 'Income Tax: Superannuation Contributions' provides the Commissioner's view that amounts that are attributable to 'employment' activity include:

• the salary or wages (as used in its ordinary meaning) from the activity; and

• an employment termination payment received by a person in consequence of the termination of their employment.

8. In Superannuation Guarantee Ruling SGR 2009/2 (SGR 2009/2) entitled 'Superannuation guarantee: meaning of the terms "ordinary time earnings" and "salary or wages"' the Commissioner states in paragraph 69:

• Lump sum payments for unused annual leave, long service leave and sick leave, whether paid on termination of employment or otherwise, are 'salary or wages'.

9. Payments were made after the termination of your employment in respect of your final annual leave and long service leave entitlements. As quoted above, SGR 2009/2 states that these unused leave payments are 'salary or wages'.

10. Therefore, the payments you received in respect of your unused annual leave, public holiday and long service leave entitlements are 'salary and wages' as defined in section 11 of the SGAA 1992 in respect of which the SGC is payable by the employer. More importantly, these payments are attributable to your employment activity in the 2013-14 income year.

11. Further, the payments for redundancy and the severance employment termination payment are payments received in consequence of the termination of your employment. As quoted above, TR 2010/1 states that these lump sum payments arising from the termination of your employment are amounts that are attributable to your employment activity.

12. Assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Assessable income also includes statutory income.

13. You have advised that you have also received overseas income during the 2013-14 income year.

14. However, in the 2013-14 income year, your income attributable to an employment activity is greater than 10% of your total of your combined assessable income, total reportable superannuation contributions and reportable fringe benefits. You therefore have not met the maximum earnings condition for the 2013-14 income year.

Conclusion

15. As previously stated, to be entitled to a deduction you must meet all applicable conditions in accordance with section 290-150 of the ITAA 1997. As you have not met the maximum earnings condition set out in section 290-160, it is not necessary to consider the other conditions. You are therefore not entitled to the personal superannuation contribution deduction of X.

16. If you had notified your superannuation fund of your intention to claim a deduction for the personal superannuation contribution, you should give that fund written notice advising that you are not entitled to claim a deduction for that contribution and their records should be amended accordingly.