Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 (81 of 2016)

Schedule 1   Transfer balance cap

Part 3   Application and transitional provisions

Income Tax (Transitional Provisions) Act 1997

34   After Division 293

Insert:

Division 294 - Transfer balance cap

Table of Subdivisions

294-A Application of Division 294 of the Income Tax Assessment Act 1997

294-B CGT relief

Subdivision 294-A - Application of Division 294 of the Income Tax Assessment Act 1997

Table of sections

294-10 Application of Division 294 of the Income Tax Assessment Act 1997

294-30 Minor excess transfer balances disregarded if remedied in first 6 months

294-10 Application of Division 294 of the Income Tax Assessment Act 1997

Division 294 of the Income Tax Assessment Act 1997 applies on and after 1 July 2017.

294-30 Minor excess transfer balances disregarded if remedied in first 6 months

Despite sections 294-30 and 294-140 of the Income Tax Assessment Act 1997 (which are about when you have excess transfer balance), you do not have excess transfer balance in your transfer balance account on any day in the period of 6 months beginning on 1 July 2017 if:

(a) the only transfer balance credits in the account in that period arose under item 1 of the table in subsection 294-25(1) of that Act (which is about superannuation income streams you have just before 1 July 2017); and

(b) the sum of those transfer balance credits exceeds your transfer balance cap, but is less than or equal to $1,700,000; and

(c) at the end of the period, the sum of all the transfer balance debits arising in your transfer balance account equals or exceeds the amount of the excess from paragraph (b).

Subdivision 294-B - CGT relief

Table of sections

294-100 Object

294-105 Interpretation

294-110 Segregated current pension assets

294-115 Superannuation funds using the proportionate method - deemed sale and purchase of CGT asset

294-120 Superannuation funds using the proportionate method - disregard initial capital gain but recognise deferred notional gain

294-100 Object

The object of this Subdivision is to provide temporary relief from certain capital gains that might arise as a result of individuals complying with the following legislative changes:

(a) the introduction of a transfer balance cap (as a result of Schedule 1 to the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016);

(b) the exclusion of transition to retirement income streams (and similar income streams) from being superannuation income streams in the retirement phase (as a result of Schedule 8 to that Act).

294-105 Interpretation

In this Subdivision:

pre-commencement period means the period:

(a) starting on the start ofthe day on which the Bill that became the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 was introduced into the House of Representatives; and

(b) ending just before 1 July 2017.

294-110 Segregated current pension assets

(1) This section applies if:

(a) at the start of the pre-commencement period, a CGT asset of a fund is a segregated current pension asset of the fund; and

(b) at a time (the cessation time ) in the pre-commencement period, the asset ceases to be a segregated current pension asset of the fund; and

(c) the fund held the CGT asset throughout the pre-commencement period (disregarding subsection (3)); and

(d) the fund is a complying superannuation fund throughout the period:

(i) starting at the start of the pre-commencement period; and

(ii) ending at the cessation time; and

(e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2).

(2) A choice made for the purposes of paragraph (1)(e):

(a) is to be in the approved form; and

(b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund's income tax return for the 2016-17 income year; and

(c) cannot be revoked.

(3) For the purposes of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997, the fund is taken:

(a) to have sold, immediately before the cessation time, the asset for a consideration equal to its market value; and

(b) to have purchased the asset again at the cessation time for a consideration equal to its market value.

294-115 Superannuation funds using the proportionate method - deemed sale and purchase of CGT asset

Application

(1) This section applies in relation to a CGT asset of a fund if:

(a) the fund is a complying superannuation fund throughout the pre-commencement period; and

(b) the proportion mentioned in subsection 295-390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016-17 income year is greater than nil; and

(c) the fund held the asset throughout the pre-commencement period; and

(d) throughout the pre-commencement period, the asset:

(i) was not a segregated current pension asset of the fund; and

(ii) was not a segregated non-current asset of the fund; and

(e) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2).

(2) A choice made for the purposes of paragraph (1)(e):

(a) is to be in the approved form; and

(b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund's income tax return for the 2016-17 income year; and

(c) cannot be revoked.

Deemed sale and purchase

(3) For the purposes of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997, the fund is taken:

(a) to have sold, immediately before 1 July 2017, the asset for a consideration equal to its market value; and

(b) to have purchased the asset again just after that sale for a consideration equal to its market value.

294-120 Superannuation funds using the proportionate method - disregard initial capital gain but recognise deferred notional gain

Application

(1) This section applies in relation to a CGT asset of a complying superannuation fund if:

(a) section 294-115 applies in relation to the CGT asset; and

(b) as a result of paragraph 294-115(3)(a), the fund makes a capital gain in respect of the asset (disregarding this section); and

(c) the trustee of the fund makes a choice for the purposes of this paragraph in respect of the asset in accordance with subsection (2).

(2) A choice made for the purposes of paragraph (1)(c):

(a) is to be in the approved form; and

(b) can only be made on or before the day by which the trustee of the fund is required to lodge the fund's income tax return for the 2016-17 income year; and

(c) cannot be revoked.

Disregard initial capital gain

(3) Disregard the capital gain mentioned in paragraph (1)(b).

Recognition of deferred notional gain

(4) The deferred notional gain is the 2016-17 non-exempt proportion of the amount of the fund's net capital gain for the 2016-17 income year determined on the assumptions that:

(a) subsection (3) of this section does not apply; and

(b) the fund made no capital gains in that income year other than the gain mentioned in paragraph (1)(b); and

(c) the fund made no capital losses in that income year; and

(d) the fund had no previously unapplied net capital losses from earlier income years.

(5) For the purposes of Division 102 of the Income Tax Assessment Act 1997, if a realisation event happens to the asset in an income year that starts on or after 1 July 2017:

(a) treat the fund as having made a capital gain in that income year equal to the deferred notional gain; and

(b) disregard section 102-20 of that Act in respect of that capital gain; and

(c) treat that capital gain as not being a discount capital gain.

(6) Subsection 295-390(1) of the Income Tax Assessment Act 1997 does not apply to the amount by which a net capital gain is increased (or comes into existence) as a result of subsection (5).

(7) In this section:

2016-17 non-exempt proportion means 1 minus the proportion mentioned in subsection 295-390(3) of the Income Tax Assessment Act 1997 in respect of the fund for the 2016-17 income year.

deferred notional gain has the meaning given by subsection (4).