Edited version of private advice

Authorisation Number: 1012650854089

Ruling

Subject: Deduction for personal superannuation contributions.

Question

Is the taxpayer eligible to claim a tax deduction for a personal superannuation contribution to be made to a constitutionally protected fund under section 290-150 of the Income Tax Assessment Act 1997?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2014

The scheme commences on

1 July 2013

Relevant facts and circumstances

1. Your client is between 50 and 60 years of age.

2. Your client intends to make a personal superannuation contribution to a super fund and claim a deduction for the contribution.

3. The fund is a constitutionally protected superannuation fund and noted by APRA as an exempt public sector superannuation scheme.

4. The contributions will be made for the purpose of providing superannuation benefits for your client (or their dependants before or after their death).

5. Your client operates as a sole trader.

6. Your client has not been employed in any capacity during the 20XX income year.

7. Your client will not receive any reportable fringe benefits or any reportable superannuation contributions to a complying superannuation fund in the 20XX income year.

8. Your client will provide a written notice to the trustee of the superannuation fund stating their intention to claim a deduction in respect of their contributions.

9. The deduction for personal superannuation contributions will not add or create a loss for your client.

10. Your client expects to receive an acknowledgement notice issued by the trustee of the superannuation fund acknowledging their intention to claim a deduction, and will not claim a deduction until this is received.

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(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 Subsection 290-165(2).

Income Tax Assessment Act 1997 Section 290-170.

Income Tax Assessment Act 1997 Subsection 290-170(1).

Income Tax Assessment Act 1997 Subsection 290-170(2).

Income Tax Assessment Act 1997 Paragraph 290-170(2)(c)(iii).

Income Tax Assessment Act 1997 Section 290-175.

Superannuation Industry (Supervision) ACT 1993 Section 45(6)

Reasons for decision

Summary

1. Your client can claim a deduction for personal superannuation contributions to be made to a constitutionally protected fund under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) provided all the conditions of section 290-150 of the ITAA 1997 are satisfied.

Detailed reasoning

Deduction for personal deductible superannuation contributions

2. 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).

3. 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. These conditions are:

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

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

• 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.

4. These conditions are explained in detail in Taxation Ruling TR 2010/1 (TR 2010/1) 'Income tax: superannuation contributions'.

5. Your client intends to make a personal superannuation contribution to the Fund before 30 June 20XX.

Complying superannuation fund condition

6. 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 in which the contribution is made.

7. Section 45(6) of the Superannuation Industry (Supervision) ACT 1993 provides that if at all times during a year of income when a fund was in existence, the fund was, or was part of, an exempt public sector superannuation scheme, the fund is a complying superannuation fund in relation to the year of income for the purposes of the Income Tax Assessment Act.

8. In this case, your client intends to make personal superannuation contributions to a fund which is an exempt public sector superannuation scheme. As the fund is a complying superannuation fund, this requirement will be satisfied.

Maximum earnings as an employee condition

9. 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 to deduct the contribution less than 10% of the total of the following must be attributable to the 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.

10. This calculation is referred to as the 'maximum earnings test.' Where a person is engaged in activities during the income year that would make them an employee for the purposes of the SGAA 1992, then they would need to satisfy the 10% rule in order to claim a deduction for their personal superannuation contributions.

11. Your client has advised that for the 20XX income year they:

• are engaged in a sole trading business;

• have not been employed in any capacity during the income year; and

• will not receive any reportable fringe benefits and reportable superannuation contributions.

12. As your client has not engaged in any other activities that would result in them being considered an employee, the maximum earnings as an employee condition under section 290-160 of the ITAA 1997 will not apply to your client for the 20XX income year.

Age-related condition

13. 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.

14. As your client is under the age of 75 in the 2013-14 income year, they will satisfy this condition.

Notice of intent to deduct conditions

15. Subsections 290-170 (1) and (2) of the ITAA 1997 set out the notice and validity requirements which must be satisfied to claim a deduction for superannuation contributions.

16. Subsection 290-170(1) of the ITAA 1997 requires you to provide your superannuation or RSA provider with a valid notice of intent to claim a deduction in the approved form. The notice must be provided before lodging your income tax return for the year or within 12 months of the end of the income year if you have not lodged your return by that time. The trustee must also acknowledge receipt of the notice.

17. Subsection 290-170(2) of the ITAA 1997 requires the following conditions to be satisfied for a notice of intent to deduct to be valid:

a) the notice is not in respect of the contribution;

b) the notice includes all or a part of an amount covered by a previous notice;

c) when you gave the notice:

(i) you were not a member of the fund or the holder of the * RSA; or

(ii) the trustee or * RSA provider no longer holds the contribution; or

(iii) the trustee or RSA provider has begun to pay a * superannuation income stream based in whole or part on the contribution;

d) before you gave the notice:

(i) you had made a contributions-splitting application (within the meaning given by the regulations) in relation to the contribution; and

(ii) the trustee or RSA provider to which you made the application had not rejected the application.

18. Your client intends to provide a valid notice of intent to claim the deduction to the Fund once the proposed contribution is made. Your client will await an acknowledgment of receipt of their notice from the Trustee of the Fund prior to claiming the deduction.

19. Your client's notice of intent to claim a deduction will meet the notice conditions in subsection 290-170(1) of the ITAA 1997 provided your client lodges this notice with the fund trustee before they lodge their income tax return for the 20XX income year, or by 30 June 2015 (whichever is the earlier), and the trustee duly acknowledges this notice.

20. Your client's notice of intent to claim a deduction will be valid provided it satisfies the validity conditions listed above in subsection 290-170(2) of the ITAA 1997.

Deduction limited by amount specified in notice

21. Subsection 290-175 of the ITAA 1997 states that the deduction cannot be more than the amount covered by the notice given under section 290-170 of the ITAA 1997.

22. Provided the amount of the deduction your client will claim does not exceed the amount specified in their section 290-170 notice, your client will also satisfy this requirement.

Deduction limits

23. Allowable deductions are limited under subsection 26-55(2) of the ITAA 1997 to the amount of assessable income remaining after subtracting all other deductions from a taxpayer's assessable income. Thus, allowable deductions cannot create or increase a loss to be carried forward.

24. You have advised that the deduction for the proposed contribution will not add to or create a loss for your client. Accordingly your client will satisfy this condition for this income year.

Conclusion

25. As your client will satisfy all the required conditions for deductibility under section 290-150 of the ITAA 1997, your client can claim a deduction for the personal superannuation contribution made to the Fund in the 20XX income year.