Edited version of your written advice

Authorisation Number: 1012911635126

Date of advice: 16 November 2015

Ruling

Subject: Contributions to a superannuation fund.

Questions

1. Can you claim a deduction for personal superannuation contributions made to a superannuation fund (the Fund) in the 2014-15 income year under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)?

2. Can you claim a deduction for personal superannuation contributions to be made to the Fund in the 2015-16 income year under section 290-150 of the ITAA 1997?

Answers

1. Yes.

2. Yes.

This ruling applies for the following periods:

Income year ended 30 June 2015

Income year ending 30 June 2016

The scheme commences on:

1 July 2014

Relevant facts and circumstances

You operate in a private business.

You are more than 18 and under 75 years of age.

You are a member of the Fund. The Fund is a constitutionally protected fund (CPF) administered by a superannuation board. The Fund is also an exempt public sector superannuation scheme and a complying superannuation fund.

You have made personal superannuation contributions to the Fund in the 2014-15 income year and you intend to make personal superannuation contributions to the Fund in the 2015-16 income year.

You have not engaged in any employment activities as defined in subsection 290-160(1) of the ITAA 1997 in the 2014-15 income year; and you will not engage in any employment activities in 2015-16  income year.

You intend to provide a valid notice to the trustee of the Fund, stating that you intend to claim a deduction for contributions made in the 2014-15 and 2015-16 income years within the time required by paragraph 290-170(1)(b) of the ITAA 1997.

You will ensure that the trustee of the Fund gives you an acknowledgment of receipt of the notice of intent to deduct your contributions made in the 2014-15 and 2015-16 income years.

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 Section 290-155.

Income Tax Assessment Act 1997 Section 290-160.

Income Tax Assessment Act 1997 Section 290-165.

Income Tax Assessment Act 1997 Section 290-170.

Income Tax Assessment Act 1997 Section 290-175.

Income Tax Assessment Act 1997 Subparagraph 292-25(2)(c)(iii).

Reasons for decision

Summary of decision

Based on the information provided in this ruling, you can claim a deduction for personal superannuation contributions made to the Fund in the 2014-15 and 2015-16 income years.

Detailed reasoning

Deducting personal 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 ITAA 1997.

However, subsection 290-150(2) of the ITAA 1997 provides that the conditions in sections 290-155, 290-160 (if applicable), 290-165 and 290-170 must all be satisfied before the person can claim a deduction for the contributions made in that income year. These conditions are explained in detail in Taxation Ruling TR 2010/1 (TR 2010/1) titled 'Income Tax: superannuation contributions'.

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 you made the contribution.

The Fund is a complying superannuation fund therefore, you will satisfy this condition.

Maximum earnings as an employee condition

Subsection 290-160(1) of the ITAA 1997 operates to apply the maximum earnings as an employee condition if, in the income year in which the contribution is made, the person is engaged in any of the following activities:

• holding an office or appointment (for example, a director of a company);

• performing functions or duties;

• engaging in work;

• doing acts or things; and

the activities result in that person being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992.

Subsection 290-160(2) of the ITAA 1997 prescribes that a deduction for personal contributions can only be claimed where less than 10% of the total of the following is attributable to 'employment' activities:

• assessable income for the income year;

• reportable fringe benefits total for the income year; and

• reportable employer superannuation contributions total for the income year.

In TR 2010/1, the Commissioner discusses the operation of the maximum earnings as employee condition. In paragraph 58 of TR 2010/1 the Commissioner states that those persons who have not engaged in an 'employment' activity in the income year in which they make a contribution are not subject to the maximum earnings test.

You have advised that you have not been employed in any capacity in the 2014-15 income year and that you will not be employed in any capacity during the 2015-16 income year. Therefore, the maximum earnings as an employee condition does not apply to you in the 2014-15 and 2015-16 income years.

Age-related conditions

For those who, like you, are more than 18 years, 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.

As you will be under age 75 at the relevant time, you satisfy the age-related conditions.

Notice of intent to deduct conditions

Section 290-170 of the ITAA 1997 provides that you must give to the trustee of the complying superannuation fund a valid notice, in the approved form, of your intention to claim a deduction in respect of the contribution, and you must also have been given an acknowledgment of receipt of the notice by the fund trustee.

Section 290-170 of the ITAA 1997 also provides that you must give this notice to the fund trustee by the earlier of the date your income tax return is lodged or the end of the income year following the year in which the contribution was made.

A notice will be valid as long as the following conditions are satisfied:

• the notice is in respect of the contribution;

• 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;

• the fund trustee 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 fund trustee 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 fund trustee has not rejected the application.

You have advised that you will provide a valid notice of your intention to claim a deduction to the Fund trustee in respect of the proposed contribution. You have also advised that you will obtain a written notice from the trustee acknowledging receipt of this notice. You assert that you will ensure that all the requirements of section 290-170 of the ITAA 1997 are met.

Provided you lodge a valid notice of intent with the Fund trustee before your income tax return is lodged for the 2014-15 and 2015-16 income years or by 30 June 2016 for the 2014-15 income year and by 30 June 2017 for the 2015-16 income year, whichever is the earlier, and the trustee duly acknowledges your notice, the notice of intent to deduct conditions under section 290-170 of the ITAA 1997 will be satisfied.

Deduction limits

Section 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.

Provided the amount of the deduction you claim does not exceed the amount specified in your section 290-170 notice, you may claim a full deduction for the amount of contributions made.

However, the allowable deduction is limited under subsection 26-55(2) of the ITAA 1997 to the amount of assessable income remaining after subtracting all other deductions from your assessable income.

Therefore a deduction for personal superannuation contributions cannot add to or create a loss.

Conclusion

As you will satisfy all the required conditions in Subdivision 290-C of the ITAA 1997, you can claim a deduction in the 2014-15 and 2015-16 income years for personal contribution you intend to make to the Fund in both the 2014-15 and 2015-16 income years.

Further issues for you to consider

It is noted that the Fund is a CPF. Therefore, subparagraph 291-25(2)(c)(iii) of the ITAA 1997 operates to exclude the proposed contribution from being a concessional contribution in the 2014-15 and 2015-16  financial years. As a result, the contribution will not be counted towards your annual concessional contributions cap for these financial years.

However, to the extent that the proposed contribution forms part of the contributions segment of your superannuation interest in the Fund (which includes personal undeducted contributions), in accordance with subsection 292-90(2) of the ITAA 1997, it will be a non-concessional contribution, and it will be counted towards your non-concessional contributions cap for the financial year in which the contribution is made.