Edited version of your written advice

Authorisation Number: 1013022640229

Date of advice: 24 May 2016

Ruling

Subject: Deductibility of personal superannuation contributions

Question 1

For the purposes of section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997), has the taxpayer satisfied the 'maximum earnings as employee' condition under section 290-160 of the ITAA 1997?

Answer

No.

This ruling applies for the following period:

Income year ending 30 June 2016.

The scheme commences on:

1 July 2015.

Relevant facts and circumstances

The Taxpayer is over 18 but under 75 years.

At the commencement of the 2015-16 income year, the Taxpayer's employment was terminated and they received a termination of employment payment.

During the 2015-16 income year, the Taxpayer received income from a number of non-employment related sources, including:

• Gross rental receipts;

• Assessable capital gain;

• Interest income; and

• Pension income

The Taxpayer intends to make a personal superannuation contribution to their superannuation fund (the Fund) before 30 June 2016.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 290-150.

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 Subsection 290-160(2).

Superannuation Guarantee (Administration) Act 1992 Subsection 12(1).

Reasons for decision

Summary

The percentage of the total amount that is attributable to the Taxpayer's employment activities in the 2015-16 income year is 111% of the Taxpayer's total assessable amounts for that year. Therefore, the Taxpayer fails the maximum earnings as employee condition under section 290-160 of the ITAA 1997 in the 2015-16 income year.

Consequently, the Taxpayer cannot deduct any contributions made to the Fund in the 2015-16 income year.

Detailed reasoning

In accordance with section 290-150 of the ITAA 1997, a person who makes contributions to a superannuation fund for the purpose of providing superannuation benefits for themselves, can claim the deduction for contributions in the income year the contributions are made. However, to deduct the contributions, the person must satisfy a number of conditions, including the 'maximum earnings as employee' condition set in section 290-160 of the ITAA 1997.

Section 290-160 of the ITAA 1997 applies only 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.

In this case, the Taxpayer's employment was terminated on a date in the 2015-16 income year, therefore, they were engaged in employment activities in the 2015-16 income year. Therefore, section 290-160 of the ITAA 1997 applies to the Taxpayer.

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 employment activities:

• assessable income;

• reportable fringe benefits total; and

• reportable employer superannuation contributions;

In Taxation Ruling TR 2010/1 Income tax: superannuation contributions (TR 2010/1), the Commissioner discusses the operation of the maximum earnings as employee condition and, at paragraph 64, states:

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 …

(emphasis added).

In this case, in the 2015-16 income year the Taxpayer received total income comprising:

• non-employment related income; and

• employment related income

The percentage of the amounts that are attributable to the Taxpayer's employment activities in the 2015-16 income year is 111% of the Taxpayer's total assessable amounts for that year. Therefore, the Taxpayer fails the maximum earnings as employee condition in the 2015-16 income year.

Consequently, the Taxpayer cannot deduct any personal contributions made to a superannuation fund in the 2015-16 income year.