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Edited version of your written advice
Authorisation Number: 1013085870523
Date of advice: 9 September 2016
Ruling
Subject: Superannuation: deductibility of employer superannuation contributions
Question 1
Is the employer entitled to claim a tax deduction in the 2015-16 income year under section 290-60 of the Income Tax Assessment Act 1997 (ITAA 1997) for a superannuation contribution intended to be made to the fund in the 2015-16 income year, but due to a mistake by the clearing house, was not credited to the correct fund?
Answer
No
This ruling applies for the following period:
For the year ended 30 June 2016
The scheme commences on:
1 July 2015
Relevant facts and circumstances
In the fourth quarter of the 2015-16 income year a sum of money was forwarded from the bank account of an employer (the Employer) to a superannuation clearing house (the Clearing House) for distribution to a superannuation fund (the Fund).
The employer provided documentation from the Clearing House dated in the first quarter of the 2016-17 income year advising that in the fourth quarter of the 2015-16 income year they misdirected the contribution to an incorrect bank account due to a processing error.
The employer also provided documentation from the Clearing House in which they advised that the error had been corrected and the contribution had been deposited into the correct account along with a copy of the original remittance advice which confirms the contribution was originally sent in the fourth quarter of the 2015-16 income year.
Relevant legislative provisions
Income Tax Assessment Act 1997
Section 290-60
Subsection 290-60(3)
Subsection 290-60(4)
Section 290-70
Section 290-75
Section 290-80
Reasons for decision
The operative provisions dealing with the deductibility of contributions to a superannuation fund for the benefit of an employee are contained in Subdivision 290-B of Division 290 of the Income Tax Assessment Act 1997 (ITAA 1997).
An entity is entitled to claim a tax deduction in respect of all superannuation contributions under section 290-60 of the ITAA 1997 if:
• the contribution is made to a superannuation fund or a retirement savings account (RSA);
• the contribution is made for the purpose of providing superannuation benefits for another person who is an employee of the entity when the contribution is made; and
• the conditions in sections 290-70, 290-75 and 290-80 of the ITAA 1997 are also satisfied.
Subsection 290-60(3) of the ITAA 1997 states that the deduction can only be claimed in respect of the income year in which the employer made the superannuation contribution. This means that provided the entity made a superannuation contribution to a complying superannuation fund they will be able to claim a deduction for the financial year in which they made the contribution under section 290-60 of the ITAA 1997.
In the present case, a superannuation contribution was forwarded by the Employer to the Clearing House in the fourth quarter of the 2015-16 income year. The contribution was intended to be made to the Fund for the 2015-16 income year. However, due to an error by the Clearing House, the contribution was misdirected to an incorrect superannuation fund account in the fourth quarter of the 2015-16 income year.
The Clearing House error was not rectified until the first quarter of the 2016-17 income year, when they deposited the contribution into the Fund account.
As the contribution was not received by the employees' Fund in the 2015-16 income year, the Employer is not entitled to claim a deduction for the superannuation contribution in that income year.
In Taxation Ruling TR 2010/1 Income tax: superannuation contributions the Commissioner of Taxation has provided his view on when a contribution is made.
At paragraph 183 of TR 2010/1 it states:
A contribution of funds as cash or an electronic funds transfer, is made when the amount is received by the superannuation provider or credited to the relevant account.
Furthermore, at paragraph 184 of TR 2010/1 it states:
It has been suggested that a contribution made by electronic funds transfer may occur as soon as the contributor has done everything necessary to effect a payment. The Commissioner does not accept that is sufficient to increase the capital of the fund.
The legislation itself is quite specific. It requires that a contribution be made in the relevant year of income to a superannuation fund and, subject to the necessary requirements being met, a deduction will be allowed for that year of income. It does not contain a discretion that can be exercised by the Commissioner to allow a deduction for the relevant year of income where the contributions were not received until a later year of income.
In view of the above, the employer superannuation contributions were not made to the fund in the 2015-16 income year. Therefore, the employer is not entitled to claim a deduction for employer superannuation contributions under section 290-60 of the ITAA 1997 for that income year.