ATO Interpretative Decision
ATO ID 2001/326 (Withdrawn)
Income Tax
Transfer of an asset to a Superannuation FundFOI status: may be released
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ATO ID 2001/326 has been withdrawn as the ATO has reconsidered its view. This issue is now dealt with by Draft Taxation Ruling TR 2004/D25This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Would the transfer of a commercial property presently that is owned by an individual taxpayer to the superannuation fund, of which the taxpayer is a member, give rise to capital gains tax event E2?
Decision
Yes. The transfer of the asset will give rise to a CGT event E2.
Facts
The taxpayer and the taxpayer's spouse own a property which is presently leased to a third party who use the premises as part of their commercial operations. The market value of the property has been determined by qualified valuers. It is proposed that the property will be transferred to a superannuation fund on 1 July 2001.
The taxpayer and the taxpayer's spouse are the sole beneficiaries of a superannuation fund. The superannuation fund is a complying fund under the Superannuation Industry (Supervision) Act 1993 (SIS Act 1993). The taxpayer and the taxpayer's spouse are the sole directors and shareholders of the superannuation fund's trustee company which has the sole purpose of acting as trustee of the superannuation fund.
Reasons for Decision
Section 104-60 of the Income Tax Assessment Act 1997 (ITAA 1997) states that a CGT event E2 happens if a person transfers a CGT asset to an existing trust. A CGT event E2 occurs at the time of the transfer of the ownership of the asset.
There are two circumstances where a CGT event E2 does not happen. The first is where the person creating the trust is the sole beneficiary of the trust and is absolutely entitled to the asset as against the trustee (disregarding any legal disability) (paragraph 104-60(5)(a) of the ITAA 1997). A beneficiary would be "absolutely entitled" to an asset as against the trustee where the interest of the beneficiary is not contingent but is vested, indefeasible and is of a kind which enables the beneficiary to direct the trustee to convey the asset to the beneficiary or otherwise (Tomlinson v Glyns Executor & Trustee Co; Hoare Trustees V Gardiner ( 1978) STC 89).
The second instance where a CGT Event E2 does not happen is if there is effectively just a change of trustee, ie where the asset was transferred from another trust and the beneficiaries and terms of both trusts are the same (paragraph 104-60(5)(b) of the ITAA 1997).
We consider that the transfer of the asset by the taxpayer to the superannuation fund will constitute a CGT event E2 as none of the exceptions set out in section 104-60 of the ITAA 1997 are applicable.
Tomlinson v Glyns Executor & Trustee Co
Hoare Trustees v. Gardiner (1978) STC 89
Date of decision: 29 August 2001Year of income: Year ending 30 June 2002
Legislative References:
Income Tax Assessment Act 1997
section 104-60
paragraph 104-60(5)(a)
paragraph 104-60(5)(b)
The Act
Keywords
Capital gains tax
Acquisition of CGT assets
CGT events E1-E9 - trusts
Superannuation funds
Trust beneficiaries
ISSN: 1445-2782
| Date: | Version: | |
| 29 August 2001 | Original statement | |
| You are here | 9 April 2003 | Archived |