ATO Interpretative Decision
ATO ID 2012/79 (Withdrawn)
Superannuation
Superannuation contributions: the operation of subregulation 7.04(3) of the Superannuation Industry (Supervision) Regulations 1994 in the context of in-specie contributions of listed sharesFOI status: may be released
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This ATO ID is withdrawn from the database as subregulations 7.04(3) and 7.04(7) of the Superannuation Industry (Supervision) Regulations 1994 (SISR) have been repealed with effect from 1 July 2017. Despite its withdrawal, this ATO ID continues to be a precedential ATO view in respect of decisions for income years up to, and including, the 2016-17 income year.This document has changed over time. View its history.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Does subregulation 7.04(3) of the Superannuation Industry (Supervision) Regulations 1994 (SISR) prevent the trustees of a self managed superannuation fund (SMSF) from accepting the transfer of three parcels of shares in three different listed companies (with each parcel consisting of shares of the same class) from a member of the fund, as a personal undeducted contribution, if the combined value of all the shares transferred exceeds the member's non-concessional contributions cap for the financial year in which the transfer occurs?
Decision
No. For the purposes of applying subregulation 7.04(3) of the SISR, the transfer of each individual parcel of shares is a contribution that satisfies the definition of 'fund-capped contributions' in subregulation 7.04(7) of those Regulations. It is not possible to regard the three parcels as a whole as a fund-capped contribution.
Facts
An individual is a member of an SMSF.
The individual was aged 65 at the commencement of the 2011-12 financial year.
The individual was gainfully employed within the meaning of subregulation 7.01(3) of the SISR for that financial year and was eligible to contribute to the SMSF.
The individual had a non-concessional contributions cap of $150,000 for the 2011-12 financial year for the purposes of both subsection 292-85(2) of the Income Tax Assessment Act 1997 (ITAA 1997) and the definition of 'fund-capped contributions' in subregulation 7.04(7) of the SISR.
On 8 February 2012, the member contributed the following parcels of shares in three different listed companies to the SMSF:
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- 2000 shares in ABC Ltd - total market value $42,000
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- 5500 shares in DEF Ltd - total market value $78,000
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- 3200 shares in XYZ Ltd - total market value $35,000
The trustees of the SMSF wish to know whether they are prevented from accepting any part of the above contributions by subregulation 7.04(3) of the SISR.
Reasons for Decision
Subregulation 7.04(3) of the SISR provides that:
In addition to subregulation (1), the regulated superannuation fund must not accept any fund-capped contributions in a financial year in respect of a member that exceed:
Subregulation 7.04(4) of the SISR provides that:
If a regulated superannuation fund receives an amount that is inconsistent with subregulation ... (3):
A trustee of an SMSF should, before accepting a contribution for a member, consider if any contribution is 'fund-capped contributions'. Fund-capped contributions are "contributions by, or on behalf of, the member to the fund", but do "not include employer contributions in respect of the member" (see subregulation 5.01(1) of the SISR) or contributions that fall within the ambit of the exceptions to the definition of 'fund-capped contributions' listed in subregulation 7.04(7) of SISR.
In the 2011-12 financial year, a trustee was unable to accept any 'fund-capped contributions' by or on behalf of a member who was 65 years of age at 1 July 2011 that exceeded $150,000.
ATO Interpretative Decision ATO ID 2007/225 Superannuation contributions: acceptance of fund capped contributions by a self managed superannuation fund provides the ATO view that subregulation 7.04(3) of the SISR applies on a 'contribution by contribution' basis. This principle applies irrespective of the form in which the contribution is made, whether this is cash or property contributed in-specie. This includes the transfer of listed shares.
A share is a type of claim in contract against a company. Section 1070A of the Corporations Act 2001 states that a share is 'personal property' in nature. It is generally accepted that a share is 'personal property', being intangible property that is a 'chose in action'.
Torkington v. Magee [1902] 2 KB 427 describes a 'chose in action' in the following terms:
'Chose in action' is a known legal expression used to describe all personal rights of property which can only be claimed or enforced by action, and not by taking physical possession.
In the NSW Supreme Court decision of Campbell J in White v. Shortall [2006] NSWSC 1379 (affirmed on appeal), it was considered that a parcel of shares in the same company (where such shares are of the same class with identical rights attached) are fungible and are appropriately regarded as a homogenous collective, giving rise to a single chose in action or right: see paragraphs 199 and 209.
Shares in different companies, or shares in a single company that are of a different class, are attended by disparate legal and/or beneficial rights and therefore cannot be interchanged or substituted. Accordingly, such shares are not fungible and cannot be regarded as a homogenous collective, as per the principles articulated by Campbell J in White v. Shortall. It follows from the above that shares in different companies, or shares in a single company that are of a different class cannot be regarded as constituting a single chose in action or right.
In this case, it is considered each of the three parcels of shares constitutes a separate contribution for the purposes of subregulation 7.04(3) of the SISR. Therefore, the member made three separate contributions to their SMSF of $78,000, $42,000 and $35,000 on 8 February 2012.
As none of these three contributions exceeded $150,000, subregulation 7.04(3) of the SISR did not apply to prevent the trustee of the SMSF from accepting these contributions. In this case the member will have excess non-concessional contributions for the 2011-12 financial year and will receive a non-concessional contributions tax assessment.
Date of decision: 14 September 2012
Legislative References:
Corporations Act 2001
section 1070A
subregulation 5.01(1)
subregulation 7.01(3)
subregulation 7.04(3)
subregulation 7.04(4)
subregulation 7.04(7)
Case References:
Torkington v Magee
[1902] 2 KB 427
[2006] NSWSC 1379 Related ATO Interpretative Decisions
ATO ID 2007/225
Keywords
Contributions returned
Excess non-concessional contributions
In-specie contributions
Non-concessional contributions
Non-concessional contributions cap
Self managed superannuation funds
Shares
SMSF trustee
Superannuation
Superannuation excess contribution
Date reviewed: 2 March 2015
ISSN: 1445-2782
| Date: | Version: | |
| 14 September 2012 | Original statement | |
| You are here | 12 September 2018 | Archived |