“If things are not done correctly, there is little discretion for the Australian Taxation Office to remedy the situation.”

He said that under the current rules, if someone is employed, self-employed, unemployed, or retired, they may be eligible to claim a tax deduction on their after-tax super contributions, and the removal of the “work test” has made deductible contributions to super even more attractive.

“However, if members are 67-74 years old, they must meet the ‘work test’ to claim a deduction on personal super contributions,” he warned.

Ali said that to be valid, the s290-170 or NOI must be supplied to the trustee before the person submits their tax return and no later than the 30 June of the financial year following the contribution.

“It will be invalid if the person is no longer a member of the fund, the trustee no longer holds the contribution, or if the trustee has begun to pay an income stream.”

“The ATO has ruled that once a pension commences, a s290-170 can only cover contributions made post-pension. It does not matter if only part of a member’s accumulation account is used to commence a pension, and there is still enough money in accumulation to cover the deductible contribution.”

He added that if an s290-170 is submitted post-pension, no deduction is allowed for any contributions made before the pension.

“This may be relevant where a member is implementing a pension strategy and wishes to ‘re-cast’ the income stream to accommodate personal deductible contributions at the end of the financial year to ensure a tax deduction, also known as a pension commutation.”

“If an s290-170 is not made prior to the new pension, then the contributions will not be considered personal deductible contributions, and no deduction can be claimed. This may have a substantial impact on the client resulting in higher personal tax.”

There have been a number of recent court cases that illustrate the impact of getting the s290-170 notice wrong.

“The first is the Administrative Appeals Tribunal (AAT) decision in Khanna v Commissioner of Taxation [2022] AATA 33 where the taxpayer claimed a tax deduction on a contribution some 11 months after he had lodged his 2018-19 income tax return,” Ali said.

“He had not initially claimed a deduction and the retrospective claim of a deduction was due to the taxpayer being made redundant during COVID in 2020 and looking to get a tax refund.”

The court heard that the member’s super fund said it was not able to process the s290-170 notice on the basis that 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.

The court heard that an NOI must be given before the member lodges their personal income tax return and before the end of the next income year.

“Whilst the taxpayer claimed he should have been given an extension due to the COVID pandemic, 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,” Ali said.

“There is no discretion to extend the time or to disregard non-compliance with that time limit. Accordingly, the AAT held that the taxpayer was not able to claim a tax deduction for personal superannuation contributions because he did not submit his NOI on or before 3 July 2019 when he lodged his personal income tax return.”

Advisers, fund members and trustees need to be extremely vigilant when making contributions to super with the intent of claiming a tax deduction, especially where the deductible contribution is being made to a retail or public offer fund, and/or then rolled over to an SMSF, Ali said.

“It is also imperative to provide a valid s290-170 before a pension starts and be in receipt of an acknowledgement from the fund.”

“As section 290-170 notices are enshrined in law, there is little that can be done after the fact and the ATO has no room for discretion.”