Deduction for personal superannuation contributions - 'eligible person' in relation to a year of income

Was the taxpayer an 'eligible person' within the meaning of subsection 82AAS(2) of the Income Tax Assessment Act 1936 (ITAA 1936) in relation to the 2003-04 year of income in the situation where there was a reasonable expectation that during the year of income the taxpayer would be provided with superannuation benefits and those benefits would be attributable to contributions made, or required to be made, by the taxpayer's former employer in the year of income?

Yes, the taxpayer was an 'eligible person' within the meaning of subsection 82AAS(2) of the ITAA 1936 in relation to the 2003-04 year of income even though there was a reasonable expectation that during the year of income the taxpayer would be provided with superannuation benefits and those benefits would be attributable to contributions made, or required to be made, by the taxpayer's former employer in the year of income.

The taxpayer ceased employment with the entity (the former employer) on 30 June 2003.

The entity paid the taxpayer a bonus payment in September 2003 (being the 2003-04 year of income) which related to the taxpayer's performance as an employee with the entity in the 2002-03 year of income.

The taxpayer was not engaged in any eligible employment in the 2003-04 year of income.

Under subsection 82AAS(2) of the ITAA 1936, a taxpayer is an 'eligible person' in relation to a year of income unless it was reasonable to expect that during the year of income, superannuation benefits would be provided for the taxpayer in the event of his or her retirement or to dependants in the event of his or her death (paragraph 82AAS(2)(a) of the ITAA 1936). In addition, paragraph 82AAS(2)(b) of the ITAA 1936 explains that, to the extent to which those benefits would be attributable to the year of income, the benefits would be wholly or partly attributable to contributions made, or required to be made, in relation to the year of income: • to a superannuation fund of the taxpayer (sub-subparagraph 82AAS(2)(b)(i)(A) of the ITAA 1936); and • by someone other than the taxpayer (sub-subparagraph 82AAS(2)(b)(i)(B) of the ITAA 1936); and • in connection with the eligible employment of the taxpayer in the year of income (sub-subparagraph 82AAS(2)(b)(i)(C) of the ITAA 1936); ...

'Eligible employment' as it relates to subsection 82AAS(2) of the ITAA 1936, is defined in subsection 82AAS(1) of the ITAA 1936 and means, in relation to a taxpayer: • the holding of any office or appointment; or • the performance of any functions or duties; or • the engaging in of any work; or • the doing of any acts or things;

that results in the taxpayer being treated as an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA).

In the Federal Court decision in Findlay v. Federal Commissioner of Taxation (1998) 88 FCR 300; 98 ATC 4623; 39 ATR 266, Sundberg J stated that the effect of subsection 82AAS(2) of the ITAA 1936 is that a person who has made a contribution to a superannuation fund is an 'eligible person' unless both the conditions in paragraph (a) and (b) are satisfied.

In the circumstances of this case, the taxpayer ceased work as an employee with the entity on 30 June 2003. The taxpayer received a payment of unused annual leave from the entity shortly after ceasing work as an employee with the entity and received a bonus payment from the entity in September 2003 (being the 2003-04 year of income) which related to the taxpayer's performance as an employee with the entity in the 2002-03 year of income.

It is the Commissioner's view that the bonus payment to the former employee will form part of the employee's salary or wages and hence the entity was required to make superannuation contributions to avoid a liability to the superannuation guarantee charge under the SGAA.

Therefore, in terms of paragraph 82AAS(2)(a) of the ITAA 1936 it was reasonable to expect that during the 2003-04 year of income, superannuation benefits would be provided for the taxpayer. To the extent those benefits would be attributable to the 2003-04 year of income, those benefits would be attributable to contributions required to be made to a superannuation fund of the taxpayer (sub-subparagraph 82AAS(2)(b)(i)(A) of the ITAA 1936) by someone other than the taxpayer (sub-subparagraph 82AAS(2)(b)(i)(B) of the ITAA 1936).

However, the superannuation benefits were not required to be made 'in connection with the eligible employment of the taxpayer in the year of income' (sub-subparagraph 82AAS(2)(b)(i)(C) of the ITAA 1936) as the taxpayer was not engaged in 'eligible employment' within the meaning of subsection 82AAS(1) of the ITAA 1936 in the 2003-04 year of income. The taxpayer did not 'hold any office or appointment', 'perform any functions or duties', 'engage in any work', or 'do any act or things' that would result in the taxpayer being treated as an employee for the purposes of the SGAA. Rather, the contributions were required to be made in connection with the eligible employment of the taxpayer in the 2002-03 year of income.

The taxpayer was therefore an 'eligible person' within the meaning of subsection 82AAS(2) of the ITAA 1936 in relation to the 2003-04 year of income.