Edited version of private advice

Authorisation Number: 1052068721837

Date of advice: 21 December 2022

Ruling

Subject: Income tax - deductibility of superannuation guarantee contributions

Question

Can you claim a deduction on the payments made in relation to superannuation contributions made on behalf of your employee under section 290-60 of the Income Tax Assessment Act 1997 ('ITAA 1997')?

Answer

Yes

This ruling applies for the following periods:

year ended XX XXX 20XX

year ended XX XXX 20XX

year ended XX XXX 20XX

year ended XX XXX 20XX

year ended XX XXX 20XX

The scheme commences on:

XX XXX 20XX

Relevant facts and circumstances

You have engaged an employee since the 20XX financial year.

Your employee performs duties that are private and domestic in nature.

Your employee works more than 30 hours per week.

You make Superannuation Guarantee Contributions (the Contributions) as an employer on behalf of your employee each quarter.

Assumptions

The Contributions were made into a complying fund as per section 290-75 of the ITAA 1997.

The Contributions were made on or before the day that is 28 days after the end of the month in which your employee turned 75.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 290-60

Income Tax Assessment Act 1997 Section 290-70

Income Tax Assessment Act 1997 Section 290-75

Income Tax Assessment Act 1997 Section 290-80

Superannuation Guarantee (Administration) Act 1992 Section 12

Reasons for decision

You are able to claim a deduction for the Contributions made to a superannuation fund on behalf of your employee in the income year that the contribution is said to have been made.

Detailed reasoning

Section 290-60 provides the conditions which are required to be satisfied in order for you to be able to deduct a contribution you make.

Subsection 290-60(1) states that you can deduct a contribution you make to a superannuation fund, or an RSA, for the purposes of providing superannuation benefits for another person who is your employee when the contribution is made.

Taxation Ruling TR 2010/1 Income tax: superannuation contributions ('TR 2010/1') provides the Commissioner's view on contributions made to a superannuation fund. Paragraphs 7, 39 and 41 of TR 2010/1 state the Commissioner's view on a person's or contributor's 'purpose' as follows:

7. A person's purpose is the object which they have in view or in mind.

39. Whether a superannuation contribution is deductible is determined by regard to the purpose of the contributor. The contributor's purpose must be to provide superannuation benefits for a particular person or class of persons.

41. Providing superannuation benefits must be the person's sole purpose. However, it does not matter that a person takes account if the incidental consequences of making a contribution such as obtaining a tax deduction.

You have stated that you have been making contributions on behalf of your employee into their elected superannuation fund for the purpose of providing your employee with superannuation benefits and fulfilling your obligations as an employer. Therefore, it is considered that the contributions made are for the purposes of providing superannuation benefits for another person under subsection 290-60(1).

Subsection 290-60(2) states that the conditions in sections 290-70, 290-75 and 290-80 must all be satisfied before you can claim a deduction for the contributions made on behalf of your employee.

Lastly, if you satisfy the requirements in subsections 290-60(1) and 290-60(2), you are able to claim a deduction for superannuation contributions made by you on behalf of your employee in the same income year that contributions are made.

Employment activity conditions

Section 290-70 requires that in order to deduct the contribution made on behalf of another party, that party must be:

(aa) your employee (within the expanded meaning of employee given by section 12 of the Superannuation Guarantee (Administration) Act 1992 (SGAA)); or

(a) engaged in producing your assessable income; or

(b) an Australian resident who is engaged in your business.

Section 290-70 was amended in the Taxation Laws Amendment (2007 Measures No. 4) Act 2007. The Explanatory Memorandum states:

Deductions for employer superannuation contributions

5.72 Paragraph 290-70(aa) is inserted into the ITAA 1997 to enable an employer to claim a deduction for superannuation contributions made on behalf of a person who is an employee ('employee', as defined in section 12 of the Superannuation Guarantee (Administration) Act 1992). [Schedule 5, items 1 and 2, section 290-70 of the ITAA 1997]

5.73 This will enable employers to claim a deduction for contributions made on behalf of SG employees who are not engaged in producing the assessable income of the business, nor engaged in the business for the employer.

5.74 However, individuals who are not SG employees will still need to be engaged in producing the assessable income of the business or engaged in the business before a deduction can be claimed.

5.75 An employer still needs to satisfy the conditions in sections 290-75 and 290-80 of the ITAA 1997 in order to claim a deduction.

.....

Section 12 of the SGAA provides an expanded interpretation of the terms 'employee' and 'employer'. Most relevant to your circumstances, subsection 12(11) provides that:

(11) A person who is paid to do work wholly or principally of a domestic or private nature for not more than 30 hours per week is not regarded as an employee in relation to that work.

Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee? ('SGR 2005/1') provides guidance on when an individual is considered to be an 'employee' under section 12 of the SGAA. Most relevant to your circumstances, paragraphs 93 to 98 state the Commissioner's view on when individuals performing principally private or domestic responsibilities are considered an 'employee' for the purposes of section 12 of the SGAA:

93. Subsection 12(11) of the SGAA provides that a person who is paid to do work wholly or principally of a domestic or private nature for not more than 30 hours per week is not an employee in relation to that work. A person who is paid to do work of this nature for more than 30 hours per week may or may not be an employee depending on whether they fall within the other provisions of section 12, as discussed above.

94. The terms 'private' and 'domestic' are not defined in the SGAA so it is necessary to refer to the ordinary meaning of the words.

95. The Macquarie Dictionary (third edition) defines 'domestic' to mean 'of or relating to the home, the household or household affairs' and 'private' to mean 'belonging to oneself', 'being one's own', 'individual or personal'.

97.... In our view, work of a domestic or private nature ordinarily means work relating personally to the individual making payment for the work or to the person's home, household affairs or family organisation.

98. For example, people employed by someone to clean their home, to mind their children, to effect repairs or maintenance of their home, or to tend their home garden would be engaged in domestic or private work. If they worked for that person for not more than 30 hours a week, they would not be that person's employee under the SGAA.

You have provided that your employee performs duties which falls under the ordinary definition of 'domestic' and 'private' as stated above.

You have also provided that your employee works more than 30 hours per week. As a result, they are considered an employee under section 12 of the SGAA, and paragraph 290-70(aa) in turn. Therefore, the Contributions made by you satisfy the employment activity conditions as per section 290-70.

Complying fund conditions

The condition in section 290-75 requires that if a contribution was made to a superannuation fund, the fund must be a complying superannuation fund for the income year in which the contribution is made.

Assuming that the contributions are made into a complying superannuation finds, the Contributions satisfy the complying funds conditions as per section 290-75.

Age-related conditions

Under subsection 290-80(1), the ability to claim a deduction ceases for contributions that are made after 28 days from the end of the month in which the employee turns 75 years of age.

Assuming that your employee is aged less than 75 years during the years ending XX XXX 20XX, 20XX, 20XX, 20XX and 20XX, the Contributions satisfy the age-related conditions as per section 290-80.

Conclusion

Based on above, conditions in subsections 290-60(1) and 290-60(2) have been satisfied. Therefore, you are able to claim a deduction for superannuation contributions you make to a superannuation fund on behalf of your employee, in the same income year that the contributions are taken to have been made.

Additional Information

TR 2010/1 provides guidance on the Commissioner's view on when a contribution is deemed to have been 'made'. Paragraph 12 of TR 2010/1 states that generally a contribution is made when the funds are received by the superannuation provider.

TR 2010/1 also provides further guidance on different ways in which funds are typically transferred and when the contribution is said to have been made. Please refer to TR 2010/1 for guidance on your specific method of transferring funds when making the Contributions.