Edited version of private advice

Authorisation Number: 1051525554011

Date of advice: 20 June 2019

Ruling

Subject: Taxed complying superannuation fund

Question 1

Can you claim a tax deduction under Subdivision 290-C of the Income Tax Assessment Act 1997 (ITAA 1997) for personal contributions made to a taxed complying superannuation fund during the 2018-19, 2019-20, 2020-21 and 2021-22 income years?

Answer

Yes

Question 2

Will a superannuation lump sum benefit withdrawn from a taxed complying superannuation fund be non-assessable non-exempt income to you under section 301-10 of the ITAA 1997 once you have reached 60 years of age?

Answer

Yes.

This ruling applies for the following periods:

Income years ending 30 June 2019, 2020, 2021 and 2022

The scheme commences on:

1 July 2018

Relevant facts and circumstances

1.      We received a private ruling application from you about the deductibility of personal contributions you intend to make to a taxed complying superannuation fund and the taxation of lump sum superannuation benefits withdrawn from a taxed complying superannuation fund.

2.      In your private ruling application, you also requested advice on:

·         the transfer balance cap

·         the defined benefit income cap

·         the concept of total superannuation balance

·         concessional contributions, the concessional contributions cap and the taxation of excess concessional contributions

·         superannuation contributions made on behalf of a spouse.

3.      In your private ruling application, you advised that:

·         You are retired from full-time employment.

·         You commenced a defined benefit income stream with fortnightly payments which equates to an annual amount that is greater than $100,000.00 (but less than $150,000.00 per annum).

·         You have not received any superannuation lump sum benefits.

·         You have not been gainfully employed since your retirement.

·         You have not received any employment income or salary or wages since your retirement.

·         Your assessable income since retirement has comprised of your defined benefit income stream and minor amounts of bank interest.

·         You intend to open an account with an industry superannuation fund (which is not a Commonwealth public sector superannuation scheme or a constitutionally protected superannuation fund) and make personal contributions before 30 June 2019. You also intend to make further personal contributions to the industry superannuation fund each income year thereafter.

·         You intend to lodge a valid notice with the industry superannuation fund and receive acknowledgement of receipt of your valid notice from them.

4.      The following topics were discussed with an ATO Officer:

·         the acceptance of contributions by a complying superannuation fund

·         the eligibility criteria for deducting personal contributions made to a complying superannuation fund

·         the operation of the defined benefit income cap

·         capped defined benefit income streams

·         concessional contributions, the concessional contributions cap and the taxation of excess concessional contributions

·         the concept of total superannuation balance

·         the transfer balance cap

·         the taxation of superannuation lump sum benefits

·         superannuation contributions made on behalf of a spouse.

5.      It was confirmed that you wanted to continue with your private ruling application and suggested that supporting documentation may be required.

6.      It was confirmed that you:

·         were only currently receiving a superannuation income stream

·         had not received any superannuation lump sum benefits (up to the low rate cap)

·         would not roll over any funds into the industry superannuation fund.

7.      We also confirmed that the personal contributions to the industry superannuation fund would not be:

·         attributable (in whole or in part) to a capital gain from certain capital gains tax events

·         a downsizer contribution

·         a first home super saver scheme re-contribution.

Assumptions

8.      We advised that we would need to make some assumptions to action your private ruling application.

9.      You agreed to the following assumptions to action your private ruling application:

·         the personal contributions would be accompanied with a valid notice given to the industry superannuation fund

·         acknowledgment of receipt of your valid notice would be received from the industry superannuation fund.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 290-C

Income Tax Assessment Act 1997 Section 301-10

Reasons for decision

Summary

You will be entitled to claim a tax deduction under Subdivision 290-C of the Income Tax Assessment Act 1997 (ITAA 1997) for personal contributions made to a taxed complying superannuation fund during the 2018-19, 2019-20, 2020-21 and 2021-22 income years (within the deduction limits).

A superannuation lump sum benefit withdrawn from a taxed complying superannuation fund will be non-assessable non-exempt income to you under section 301-10 of the ITAA 1997 once you have reached 60 years of age.

Detailed reasoning

Deduction for personal contributions made to a superannuation fund

Subdivision 290-C of the ITAA 1997

A person can claim a deduction for personal contributions made to a superannuation fund for the purpose of providing superannuation benefits for themselves under subsection 290-150(1) of the ITAA 1997. However, subsection 290-150(2) of the ITAA 1997 requires the conditions in section 290-155, section 290-165, section 290-167, section 290-168 and section 290-170 of the ITAA 1997to also be met to claim a deduction for personal contributions made to a superannuation fund.

In addition, subsection 290-150(3) of the ITAA 1997 states that a deduction can only be claimed in the income year in which the person made the personal contributions to the superannuation fund. The amount that can be deducted is limited in some situations under subsection 290-150(4) of the ITAA 1997 where a person makes personal contributions to a superannuation fund that are attributable (in whole or in part) to a capital gain from certain capital gain tax events.

In situations where a deduction for personal contributions made to a superannuation fund has been allowed, the personal contributions made to the superannuation fund will be treated as concessional contributions under subsection 291-25 of the ITAA 1997 and included in the assessable income of the superannuation fund to be taxed at a rate of 15%.

Complying superannuation fund condition

To claim a deduction for personal contributions made to a superannuation fund, section 290-155 of the ITAA 1997requires the personal contributions to be made to a complying superannuation fund in the income year in which the personal contributions were made.

The complying superannuation fund must not be:

·         a Commonwealth public sector superannuation scheme in which the person has a defined benefit interest

·         a superannuation fund that would not include the contribution in its assessable income under section 295-190 of the ITAA 1997 (disregarding the operation of Subdivision 295-D of the ITAA 1997)

·         a superannuation fund of a kind prescribed in the regulations.

The personal contributions made to a complying superannuation fund must also not be contributions of a kind prescribed in the regulations that have been made to a superannuation fund of the kind prescribed in the regulations.

Age-related condition

To claim a deduction for personal contributions made to a superannuation fund, subsection 290-165(1) of the ITAA 1997 requires any personal contributions made to a superannuation fund by a person who is under 18 years of age at the end of the income year to be derived from income that is:

·         from carrying on a business

·         attributable to activities, or circumstances, that result in the person being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (assuming that subsection 12(11) of the Superannuation Guarantee (Administration) Act 1992 had not been enacted).

In any other case, subsection 290-165(2) of the ITAA 1997 requires any personal contributions made to a superannuation fund to be made on or before a day that is 28 days after the end of the month in which the person turns 75 years of age.

Contribution must not be a downsizer contribution condition

To claim a deduction for personal contributions made to a superannuation fund, section 290-167 of the ITAA 1997 requires the personal contributions made to a superannuation fund to not be downsizer contributions covered by section 292-102 of the ITAA 1997.

Contribution must not be a re-contribution under the first home super saver scheme condition

To claim a deduction for personal contributions made to a superannuation fund, section 290-168 of the ITAA 1997 requires the personal contributions made to a superannuation fund to not be contributions that the person has notified the Commissioner about under section 313-50 of the ITAA 1997.

Notice of intent to deduct contributions condition

To claim a deduction for personal contributions made to a superannuation fund, section 290-170 of the ITAA 1997 requires the person to give their superannuation fund a valid notice in the approved form of their intention to claim a deduction.

The valid notice must be given before:

·         if the person has already lodged their income tax return for the income year in which the personal contributions were made to the superannuation fund, on a day before the end of the next income year - the end of that day

·         otherwise, at the end of the next income year.

Acknowledgement of receipt of the valid notice from the superannuation fund must also be received.

Deduction limits

A person can only claim a deduction for personal contributions made to a superannuation fund up to the amount stated in the valid notice under section 290-175 of the ITAA 1997. A deduction for personal contributions made to a superannuation fund cannot give rise to a refund under section 26-55 of the ITAA 1997.

Taxation of superannuation benefits

Section 301-10 of the ITAA 1997

A superannuation benefit includes a superannuation lump sum benefit under section 307-65 of the ITAA 1997. A superannuation benefit is non-assessable non-exempt income if it is received by a person who has reached 60 years of age or above under section 301-10 of the ITAA 1997.

Different rules apply if the superannuation benefit includes an element untaxed in the superannuation fund or if the superannuation benefit is a superannuation income stream benefit that is defined benefit income.

Application to your circumstances

We received a private ruling application from you about the deductibility of personal contributions you intend to make to a taxed complying superannuation fund and the taxation of lump sum superannuation benefits withdrawn from a taxed complying superannuation fund.

In the private ruling application, you advised that:

·  You intend to open an account with an industry superannuation fund (which is not a Commonwealth public sector superannuation scheme or a constitutionally protected superannuation fund) and make personal contributions before 30 June 2019. You also intend to make further personal contributions to the industry superannuation fund each income year thereafter.

·  You intend to lodge a valid notice with the industry superannuation fund and receive acknowledgement of receipt of your valid notice from them.

You confirmed that:

·         you would not roll over any funds into the industry superannuation fund

·         the personal contributions made to the industry superannuation fund would not be attributable (in whole or in part) to a capital gain from certain capital gains tax events

·         the personal contributions made to the industry superannuation fund would not be a downsizer contribution

·         the personal contributions made to the industry superannuation fund would not be a first home super saver scheme re-contribution.

You agreed to the following assumptions to action your private ruling application:

·  the personal contributions would be accompanied with a valid notice given to the industry superannuation fund

·  acknowledgment of receipt of your valid notice would be received from the industry superannuation fund.

Inbound correspondence confirmed you were a member of an industry superannuation fund.

As you will satisfy the conditions in section 290-150, section 290-155, section 290-165, section 290-167, section 290-168 and section 290-170 of the ITAA 1997, you will be eligible to claim a deduction for personal contributions made to the industry superannuation fund for the purpose of providing superannuation benefits for yourself for the 2018-19, 2019-20, 2020-21 and 2021-22 income years (within the deduction limits).

Moreover, any superannuation lump sum benefits withdrawn from the industry superannuation fund will be non-assessable non-exempt income to you under section 301-10 of the ITAA 1997 once you reach 60 years of age.