ATO Interpretative Decision
ATO ID 2003/1127 (Withdrawn)
Superannuation
Retirement income entities - acquisition of collectable banknotes and coins from a related partyFOI status: may be released
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This ATO ID is withdrawn as it is superseded by paragraph 28 of SMSFR 2010/1 Self Managed Superannuation Funds: the application of subsection 66(1) of the Superannuation Industry (Supervision) Act 1993 to the acquisition of an asset by a self managed superannuation fund from a related party.This 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Can a trustee of a self managed superannuation fund (SMSF) acquire collectable banknotes and coins from a related party without breaching section 66 of the Superannuation Industry (Supervision) Act 1993 (SISA)?
Decision
No. A trustee of a SMSF cannot acquire collectable banknotes and coins from a related party without breaching section 66 of the SISA.
Facts
A related party of the SMSF owns collectable banknotes and coins.
The trustee of a SMSF wishes to acquire the collectable banknotes and coins from the related party.
Reasons for Decision
Section 66 of the SISA prohibits the acquisition of assets from related parties of regulated superannuation funds. These are some exceptions to this prohibition:
Listed securities can be transferred at market value
Business real property can be transferred at market value providing the superannuation fund has fewer than five members.
Subsection 66(5) of the SISA states that the term 'acquire an asset' does not include 'accept money.' The term 'money' is not defined in the SISA. Accordingly, the term 'money' will take its ordinary or common meaning.
The Macquarie Dictionary defines money as:
'coin or certificate (as banknotes etc.) generally accepted in payment of debts and current transactions.'
The distinction to be made between money used in its normal sense and money which has a value greater than its face value was considered by Darling J in Moss v Hancock (1899) 2 QB 111 at 116. Darling J stated at 116:
'The exchange of a coin for other coins is not conclusive proof that the exchanging was that of dealing with current coin on both sides. Many coins, which have not been formally withdrawn from currency, have a price far beyond their denominated value, by reason of their antiquity or rarity, or for their beauty of design or execution (although this last is perhaps to say again by reason of the coins being struck in another age and mint than ours). Money as currency, and not as medals, seems to me to have been well defined by Mr Walker in "Money, Trade, and Industry" as "that which passes freely from hand to hand throughout the community in final discharge of debts and full payment for commodities being accepted equally without reference to the character or credit of the person who offers it and without the intention of the person who receives it to consume it or apply it in any other use than to tender it to others in discharge of debts or payment for commodities.'
A similar approach was adopted in the Federal Court case Cusack v Federal Commissioner of Taxation [2002] FCA 1012; (2002) 2002 ATC 4676; (2002) ATR 443. In his decision Cooper J stated:
'Australian currency, whether notes or coin, including gold coin, when being used as legal tender to discharge monetary obligations is valued at its face value without regard to its intrinsic worth, if any, and without regard to any applicable issue price determined pursuant to s 14A of the Currency Act 1965 (Cth). There is thus only one value of gold coins when used as currency and that is the face value of the coin. The contention that there are 2 forms of Australian currency with different values is fallacious. Gold and other coins made of "noble" metal only have a value different to the face value of the coin when the coin is not being used as currency for any purpose and is regarded simply as a commodity.'
Accordingly, when banknotes and coins become collectable, they will have a market value which exceeds their face value. The collectable banknotes and coins become simply 'commodities' rather than money in its normal sense.
When a regulated superannuation fund acquires such collectable banknotes and coins, it will pay a higher price than their face value. As a result, the banknotes and coins would not be considered to be money under subsection 66(5) of the SISA and cannot be acquired from a related party as the acquisition does not meet any of the exceptions provided for by section 66 of the SISA.
Date of decision: 14 November 2003Year of income: Year ended 30 June 2002
Legislative References:
Superannuation Industry (Supervision) Act 1993
Section 66
Subsection 66(5)
Case References:
Moss v Hancock
(1899) 2 QB 111
[2002] FCA 1012
(2002) 2002 ATC 4676
(2002) ATR 443
Keywords
Self managed superannuation funds
SMSF acquisition of assets
ISSN: 1445-2782
| Date: | Version: | |
| 14 November 2003 | Original statement | |
| You are here | 21 May 2010 | Archived |