ATO Interpretative Decision
ATO ID 2002/670 (Withdrawn)
Superannuation
Retirement Income Entities: Reinvestment of distributions from a related trust after 11 August 1999FOI status: may be released
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This ATO ID is withdrawn as it does not clearly reflect the ATO view. ATO precedential view is contained in APRA Superannuation Circular No. II.D.6 In-House Assets.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Withdrawn 31 March 2006
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Has a contravention of section 71 of the Superannuation Industry Supervision Act 1993 (SISA) occurred where a self managed superannuation fund (SMSF) has reinvested distributions from a related trust after 11 August 1999?
Decision
No. A contravention of section 71 of SISA has not occurred where the SMSF reinvested distributions from a related trust after 11 August 1999?
Facts
The fund members are two couples, with each being the beneficiaries of the respective family trusts.
The directors of the corporate trustee of the unit trust are the adult children of the members of the SMSF. These children are not members of the SMSF or beneficiaries of the trust. The trustees of the SMSF are the individual members.
The related trust purchased a commercial property before 11 August 1999 which was financed by a bank loan.
The loan was repaid in full by 30 June 2000 from distribution reinvestment, rental income and other investment income of the trust.
The distribution reinvestment continued after 11 August 1999.
Both family trusts advised the corporate trustee of the unit trust that they wished to redeem their units in the trust on 30 June 2000. To do this, the unit trust wants to borrow from a bank again and use the commercial property as security.
Reasons for Decision
Subsection 71(1) of SISA, as amended by Superannuation Law Amendment Act No.4 1999, provides that an in-house asset of a superannuation fund includes investments in a related trust.
Section 71A exempts such an investment from being an in-house asset if it was in place as at 11 August 1999 and it was not an in-house asset under the former rules.
Further investments in the related trust after that date however will be treated as in-house assets unless specifically excluded by sections 71D or 71E of the SISA.
As the fund intends to reinvest the distributions it receives from the unit trust, back into the trust, section 71D of the SISA will apply.
Section 71D of the SISA exempts certain investments by a fund from the in-house asset rules where the investments represent a reinvestment of earnings. Therefore, if a fund had an investment in a related trust at 11 August 1999, the trustee can, after that time but not later than 30 June 2009, reinvest earnings received without those investments constituting in-house assets of the fund. Earnings on earnings received may also be reinvested during that period.
Date of decision: 24 October 2001
Legislative References:
Superannuation Industry (Supervision) Act 1993
Section 71
Section 71A
Section 71D
Case References:
Trevisan & Anor v Federal Commissioner of Taxation
21 ATR 1649
(1991) 101 ALR 26
(1991) 29 FCR 157
91 ATC 4416
Other References:
Superannuation Law Amendment Act No.4 1999 Explanatory Memorandum
Keywords
Complying superannuation funds
Superannuation fund in house assets
Self managed superannuation funds
SMSF related parties
ISSN: 1445-2782
| Date: | Version: | |
| 24 October 2001 | Original statement | |
| You are here → | 31 March 2006 | Archived |