Deductions and expenses: Superannuation (Personal Contributions)

Whether an employee can claim an income tax deduction for personal superannuation contributions to a complying fund if it is 'reasonable to expect' that superannuation benefits would be provided to the employee, where those benefits are attributable to contributions made to such a fund by another person.

No. The taxpayer was not entitled to claim a deduction for the personal superannuation contributions as the requirements of subsection 82AAT(1) ( Income Tax Assessment Act 1936 (ITAA 1936)) had not been met and there were reasonable grounds to expect that superannuation benefits attributable to an employer's contributions to the fund would be provided for the taxpayer.

During the year of income the taxpayer had made a large personal contribution to a complying superannuation fund and notified the fund that they intended to claim a deduction for the contribution.

Subsection 82AAT(1) (ITAA 1936) sets out the requirements that must be met before a personal superannuation contribution qualifies for a deduction. One of these requirements is that the person making the contribution is an 'eligible person'.

Subsection 82AAS(2) (ITAA 1936) defines 'eligible person'. Effectively a taxpayer is not an 'eligible person' if it is reasonable to expect that during the whole or part of the year of income superannuation benefits would be provided for the person in the event of retirement, or in the event of death, for dependents of the person and those benefits would be wholly or partly attributable to contributions made to the fund by another person (for example an employer) (paragraphs 82AAS(2)(a) and (b) (ITAA 1936)).

For the purposes of the 'eligible person' test, various provisions ensure that the payments of the Superannuation Guarantee Charge ( Superannuation Guarantee (Administration) Act 1992 ) are treated as employer superannuation support in the year for which it is payable (subsection 82AAS(4), subsection 82AAS(5), subsection 82AAS(6) and subsection 82AAS(7) (ITAA 1936)).

In this particular case, it was 'reasonable to expect' that the taxpayer's employer was able to meet the Superannuation Guarantee Charge obligations to the taxpayer for the year of income. There were sufficient funds available for the employer to meet the obligation and steps had been taken to ensure the obligation was met. Accordingly, the taxpayer would not be an 'eligible person' for the purposes of subsection 82AAS(2) (ITAA 1936) and would not be entitled to claim a deduction for the personal superannuation contributions.

This view is confirmed by AAT Case 24/97 97 ATC 284; 35 ATR 1254 (see also Taxation Ruling TR 96/25).