Put yourself into the shoes of a self employed person on 19/8/80 ( one day before section 82AAT(1) took effect.)

Your employed friends enjoyed relative income security plus the expectation of a superannuation provision paid for largely by their employer, who in most cases would be receiving a deduction for his contributions to the fund.

So ... The employee was not taxed on the expected benefit received from the employer's contributions, and had his own contributions taken into account in computing his concessional expenditure rebate.(In those days there was a rebate for contributions to superannuation funds for all taxpayers, regardless of their income - you have to have an assessable income less than $31,000 to qualify for the rebate under section 159SZ these days.)

If our hapless taxpayer chose to make the equivalent of an employer's contribution towards his own future pension in those bad old days, he received no deduction, hardly an equitable state of affairs ...

In fact one prominent member of the legal fraternity went so far as to suggest that this injustice prompted much tax avoidance activity.

Section 82AAT(1) says a deduction shall be allowed to a taxpayer if 4 conditions are met....

So before we worry about how much of a deduction is allowed, we had better work out what is meant by

( The short answer is one is someone who is eligible for the deduction because he pays for his own superannuation)

The (rather longer) definition of eligible person in section 82 AAS (2) is a negative one.

A public servant is worried that his superannuation pension will not be adequate to cover his needs when he retires.

He signs up for additional superannuation cover with a private fund, paying $1500.

What deduction will be allowed under section 82AAT?

Because he is eligible for benefits arising from government contributions he is not an eligible person. Answer=0

It should be noted that this would be a rare occurrence, because employers are required by law to provide some form of superannuation support for their employees.

So much for an eligible person ...but…

Part IX of the 1936 Income Tax Assessment Act authorises the concessional tax treatment of superannuation funds if they comply with certain standards.

A non complying fund will not benefit from the 15% rate on contributions, investment income and capital gains.

Section 82AAT(1) (d) says a deduction shall be allowed to a taxpayer if the person has given a notice under section 82 AAT (1A) in respect of the contribution, and the trustee of the fund has acknowledged that notice

If you are a paying contributions, you will probably receive a letter from the fund manager asking you to advise them whether you will be claiming a deduction - your reply to this notice would amount to the written notice.

Section 82 AAT (2) imposes a limit of the amount, which can be claimed as a deduction in respect of the contributions.

Section 82 AAT (2A) lays down the maximum contribution that can be subject to a deduction for each age

This limit helps to ensure that the fund retains its complying status. How?

One of the conditions of compliance of such a fund is that only the contributions required to provide retirement benefits for members will be accepted. In other words, a fund can not be used as a means for tax avoidance on the income which would be derived from surplus funds of an employer. To ensure this takes place, the legislation uses the term members reasonable benefit level, which is based on the salary received by each member of the fund.

So, the contributor can not claim a deduction for contributions to a fund IN EXCESS OF those required providing a reasonable benefit level.

Self employed taxpayer contributes $4,000 to a fund.

The fund has calculated his reasonable benefits level as $6,000.

What deduction will be allowed?

First $3000 allowed in full, PLUS 75% of excess over $3000

75% of 1000 (4000 - 3000) = 750

3000 + 750 = 3750

Self-employed, 33 year old carpenter contributes $20,000 to a fund.

What deduction will be allowed?

First $3000 allowed in full,

PLUS 75% of excess over $3000 ( 3/4* (20,000 - 3,000) = 12750)

3000 + 12750 = 15750

But this is more than the maximum deduction for a taxpayer under 35 is $10232

Remember, no deduction will be allowed for a contribution to a NON COMPLYING FUND, and that a deduction will not be added to the any carry forward loss derived by a taxpayer.

However, if you have an assessable income less than $31,000 you may qualify for the rebate of up to $100 under section 159SZ.

It is not possible for a taxpayer who is not an eligible person to be allowed a deduction for superannuation contributions, but various superannuation funds are more than happy to suggest a work around. The taxpayer asks his employer to decrease his salary by the amount of any contributions the employee might have made, and pay that 'sacrificed salary' into a fund set up for the employee. The employer will be allowed a deduction for that payment under section 82 AAC (refer CCH Master Tax Guide para 8-330) and may feel grateful enough to reward that employee in other ways...