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Edited version of your written advice
Authorisation Number: 1051178827616
Date of advice: 9 January 2017
Ruling
Subject: Deductibility of personal superannuation contributions
Question
Does the maximum earnings as employee condition in section 290-160 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to a person (the Taxpayer) for the purpose of section 290-150 of the ITAA 1997?
Answer
No
This ruling applies for the following periods:
Income year ended 30 June 20YY
Income year ended 30 June 20ZZ
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The Taxpayer was employed by an entity (the Employer).
During the course of their employment, the Taxpayer sustained a serious injury which rendered them permanently unable to work.
The Taxpayer's employment was subsequently terminated by the Employer.
The Taxpayer receives ongoing compensation payments.
The Taxpayer is not engaged in any employment activities and, due to the nature of their disability, will never be engaged in any employment activities.
In June 20YY, the Taxpayer contributed an amount to a superannuation fund (the Fund) and gave to the trustee of the Fund valid notice of their intent to claim a deduction for personal superannuation contributions (Notice of Intent) with the Fund.
The trustee of the Fund acknowledged receipt of the Notice of Intent.
In June 20ZZ, the Taxpayer contributed an amount to the Fund and gave to the trustee of the Fund a Notice of Intent.
The trustee of the Fund acknowledged receipt of the Notice of Intent.
The Fund is a complying superannuation fund.
The Taxpayer is less than 70 years.
Relevant legislative provisions
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(1).
Income Tax Assessment Act 1997 section 290-170(2).
Reasons for decision
Summary
The maximum earnings as employee condition in section 290-160 of the ITAA 1997 does not apply to the Taxpayer in the 20XX-YY and 20YY-ZZ income years because they were not engaged in any employment activities in those income years.
Detailed reasoning
Section 290-150 of the ITAA 1997 provides that an individual may deduct a personal contribution made to a superannuation fund for the purpose of providing superannuation benefits for themselves (or their dependants after their death).
However, subsection 290-150(2) of the ITAA 1997 states that all the conditions in sections 290-155, 290-160 (if applicable), 290-165 and 290-170 must also be satisfied for an individual to deduct a contribution made in that income year.
Relevantly, section 290-160 of the ITAA 1997 applies if:
(a) in the income year in which you make the contributions, 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 (assuming that subsection 12(11) of that Act has not been enacted).
The employment activity condition in subsection 290-160(1) of the ITAA 1997 is discussed in Taxation Ruling TR 2010/1 Income Tax: superannuation contributions (TR 2010/1) where, at paragraphs 57 and 58, the Commissioner states:
57. Those persons who are engaged in an 'employment' activity in the income year in which they make a contribution need to meet an earnings test if they are to deduct their contribution.
58. Those persons who have not engaged in an 'employment' activity in the income year in which they make a contribution, such as persons who although receiving workers' compensation payments are not employed at any time during the year, are not subject to the maximum earnings test.
In this case, the Taxpayer received workers' compensation payments in the 20XX-YY and 20YY-ZZ income years but was not employed at any time during those income years. Therefore, based on the above, section 290-160 of the ITAA 1997 does not apply to the Taxpayer in the 20XX-YY and 20YY-ZZ income years.
As section 290-160 of the ITAA 1997 does not apply to the Taxpayer, and they have satisfied all of the other conditions in section 290-155, 290-165 and 290-170 of the ITAA 1997, the Taxpayer is entitled to claim a deduction for personal superannuation contributions made to the Fund in the 20XX-YY and 20YY-ZZ income years.