What CGT cap election amounts are
Capital gains tax (CGT) cap election amounts include:
- small business retirement exemption amounts
- small business 15-year exemption amounts.
Whether a person is eligible to make these elections is a complex matter on which you will not be able to advise members. You should urge your members to seek professional advice before making contributions subject to these elections.
These fields are used for reporting personal contributions that a member validly elects to exclude from counting toward their non-concessional cap based on the capital gains tax small business concessions.
You should report contributions in these fields if you received a valid election (either before or at the same time as the contributions were made). You are obliged to check the validity of this election, but only to the extent that it is possible and reasonable to do so. The following are examples of questions about the validity of the election that we expect you to ask to determine validity:
- Was the election received by you before or on the date the contribution was made?
- Was the election given in respect of contributions made by the member, as opposed to contributions made by another person (such as an employer)?
- Was the election made in the approved form?
- Do you hold the member's TFN?
If you become aware that a CGT cap election was not valid after you have reported the contribution, you will need to re-report the contributions as personal contributions.
The legislation does not stipulate what action can be taken in the scenario where you have received a valid election and subsequently find that it contains errors. Generally, our position is that you can substitute the CGT exemption amount originally elected with the actual exemption amount advised on a subsequent election, treating the subsequent election as an amendment to the original election.
An approach for you to deal with this situation is to treat the form already given as if it were ineffective on the grounds that the particulars provided on the form are incorrect, and to accept another form as an amendment to the original. This approach ensures that the timeframe required by the law to submit the form has been met.
If you have already reported the contribution with an incorrect amount, you will also need to correct your reporting.
For more information, refer to Small business CGT concessions.
Election issues
Late elections
A late election is one made after the related contribution has been made. A late election is not effective. Therefore, the member's contribution should be reported at the Personal contributions field – not at either of the Capital gains tax election fields.
You have no discretion in this matter. Members seeking to lodge late elections should be referred to us for advice.
Retirement exemption elections in excess of $500,000
Members are not permitted to exclude more than $500,000 under the small business retirement exemption amount. If they elect to do so in error, you are not permitted to report amounts in excess of $500,000 at this field. The balance in excess of $500,000 must be reported at the Personal contributions field.
Example: retirement exemption elections over $500,000
In May 2018, Adam made a personal contribution of $700,000 and provided his fund (TOP Super Fund) with a CGT cap election for a small business retirement exemption of $700,000.
The fund contacted Adam to advise that TOP Super Fund cannot report more than $500,000 to the ATO as a CGT exemption. They suggested Adam seek professional advice about his eligibility to use an alternative exemption type and whether he would have an excess contributions tax liability. Adam said he had already sought professional advice and insisted the election was correct.
In order to report correctly for Adam in the approved form, TOP Super Fund reported $500,000 at the Small business retirement exemption field and $200,000 at the Personal contributions field.
End of exampleElections not in respect of personal contributions
The CGT cap election is to exclude personal contributions from the non-concessional contributions cap. It does not apply to any other type of contribution, such as contributions made by the member's employer, spouse, family and friends or business entities associated with the member.
Elections not in the approved form
The CGT cap election must be made using the Capital gains tax cap election form (NAT 71161). This is the approved form for providing a CGT cap election. The form must be completed in full and signed by the member on or before the time of the contribution.
No TFN
A personal contribution made with a CGT cap election is a member contribution for the purposes of the contributions standards. Therefore, it cannot be accepted if a valid TFN is not:
- provided on the election form or
- already held by you.
For more information, see Regulation 7.04 of the SISR Acceptance of contributions – regulated superannuation funds.