ATO Interpretative Decision

ATO ID 2010/217

Income Tax

Capital gains tax: small business concessions - retirement exemption - contribution to complying superannuation fund - transfer of real property
FOI status: may be released
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CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

If an individual chooses the retirement exemption in Subdivision 152-D of the Income Tax Assessment Act 1997 (ITAA 1997), can the contribution required under paragraph 152-305(1)(b) of the ITAA 1997 be made by transferring real property to a complying superannuation fund instead of money if the transfer satisfies the relevant provisions of the Superannuation Industry (Supervision) Act 1993 (SISA)?

Decision

Yes. If an individual chooses the retirement exemption in Subdivision 152-D of the ITAA 1997, the contribution required under paragraph 152-305(1)(b) of the ITAA 1997 can be made by transferring real property to a complying superannuation fund if the transfer satisfies the relevant provisions of the SISA.

Facts

An individual taxpayer, aged less than 55, made a capital gain from the sale of an active asset. The individual is considering choosing the small business retirement exemption to disregard the capital gain.

The individual proposes to use the capital proceeds to pay out a mortgage on real property before making an in specie transfer of the real property, instead of paying cash, to their self managed superannuation fund.

Reasons for Decision

Under subsection 152-305(1) of the ITAA 1997 an individual can choose the retirement exemption and disregard all or part of a capital gain if:

·
the basic conditions in Subdivision 152-A of the ITAA 1997 are satisfied; and
·
if the individual was under 55 just before they made the choice, they contribute an amount equal to the asset's CGT exempt amount to a complying superannuation fund or an RSA.

The question arises as to whether the requirement in paragraph 152-305(1)(b) of the ITAA 1997 can be satisfied by the transfer of real property from the individual to a complying superannuation fund.

Generally speaking, a superannuation contribution can be made in a number of ways including by transferring an asset to the superannuation provider (an in specie contribution: refer section 285-5 of the ITAA 1997, and paragraphs 4, 10, 18-25, and 151 of Taxation Ruling TR 2010/1).

A superannuation provider may breach section 66 of the SISA when an asset is acquired from a related party of the fund, such as a member (refer SMSFR 2010/1). Subsection 66(2) of the SISA does however provide an exception to the prohibition relating to the acquisition by a superannuation fund of assets from related parties where the asset is 'business real property' (as defined in subsection 66(5) of the SISA) and other conditions are satisfied.

Accordingly, it is considered that a transfer of real property to a complying superannuation fund can satisfy the requirement in paragraph 152-305(1)(b) of the ITAA 1997 to contribute an amount if the transfer of the real property satisfies the relevant provisions of the SISA.

Note: where a company or trust chooses the retirement exemption and a CGT concession stakeholder is under 55 just before a payment is made in relation to them, there is a similar requirement for the company or trust to contribute the payment to a complying superannuation fund or an RSA (paragraph 152-325(7)(a) of the ITAA 1997). The view expressed above that a transfer of real property to a complying superannuation fund can satisfy the requirement to make a contribution also applies to the requirement to make a contribution under paragraph 152-325(7)(a) of the ITAA 1997.

Amendment History

Date of Amendment Part Comment
16 January 2015 Title Amendments to clarify content

Date of decision:  25 October 2010

Year of income:  Year ended 30 June 2011

Legislative References:
Income Tax Assessment Act 1997
   Subdivision 152-A
   Subdivision 152-D
   subsection 152-305(1)
   paragraph 152-305(1)(b)
   paragraph 152-325(7)(a)
   section 285-5

Superannuation Industry (Supervision) Act 1993
   section 66
   subsection 66(2)
   subsection 66(5)

Related Public Rulings (including Determinations)
Self Managed Superannuation Fund Ruling SMSFR 2010/1
Taxation Ruling TR 2010/1

Keywords
Basic conditions for relief
Capital gains tax
CGT capital proceeds
CGT choice
CGT small business relief
Complying superannuation funds
Small business retirement exemption
In-specie contributions
Self managed superannuation funds
SMSF acquisition of asset

Siebel/TDMS Reference Number:  1-2E5KJ0R; 1-CR31J2V

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  26 November 2010
Date reviewed:  13 February 2018

ISSN: 1445-2782

history
  Date: Version:
  25 October 2010 Original statement
You are here 16 January 2015 Updated statement