Shortly after the end of the 2018-19 income year (on 3 July 2019) he lodged his personal income tax return. He did not claim any deduction for the contributions.

It was accepted that the taxpayer was a ‘COVID victim’. On 22 June 2020, he received a notice of redundancy from his employer.

Only then did the taxpayer attempt to claim an income tax deduction for personal superannuation contributions in the 2018-19 income year. (Presumably this was in order to then be able to lodge an amended income tax return and claim a refund.) However, his fund said that it was not able to process the notice. This was on the basis of s 290-170(1) of the Income Tax Assessment Act 1997 (Cth). Section 290-170(1) requires that, in order to claim a deduction for a personal superannuation contribution, a taxpayer must give to their super fund a notice of intent to deduct the contribution and the notice ‘must’ (emphasis added) be given before the earlier of:

• When they lodge personal income tax return; and
• The end of the next income year.

The taxpayer argued that he should have been granted an extension to lodge his notice due to the ATO and MyGov websites advertising support for taxpayers who are affected by disaster events such as the COVID-19 pandemic.

However, the AAT found that the word ‘must’ indicates an obligation to comply with the notice requirements, including the statutory time limit for giving the notice. There is no discretion to extend the time or to disregard non-compliance with that time frame.

Accordingly, the AAT held that ‘[u]nfortunately for the [taxpayer] … he is not able to claim a tax deduction for personal superannuation contributions … because he did not submit his Notice on or before 3 July 2019.’

Therefore, this decision serves as an important reminder of the strictness of the rules for deducting personal superannuation contributions.

I am reminded of a somewhat similar decision from 11 years ago: Johnston and Commissioner of Taxation [2011] AATA 20. There, the taxpayer had not provided any notice to the fund, but nevertheless (via his tax agent) claimed a deduction for personal superannuation contributions. The ATO then queried the taxpayer’s deduction claims. Only then did the taxpayer provide the notice to his super fund. But by then it was too late, because the time limit set by s 290-170(1). Much like the taxpayer in Khanna, the  taxpayer in Johnston was not entitled to claim a deduction. However, because the taxpayer in Johnston actually had lodged a return incorrectly claiming a deduction, the Johnston decision focused on how much penalty if any to apply. (Ultimately, no penalty was applied in Johnston.)

Nevertheless, the rules regarding eligibility for claiming personal superannuation contributions are strict. Failure to comply with them — particularly the time limits — can cause a taxpayer to be ineligible to claim a deduction.

By Bryce Figot, special counsel DBA Lawyers