Edited version of private ruling

Authorisation Number: 1011721920484

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Ruling

Subject: CGT small business retirement exemption

Question

Will an in specie contribution of a property be excluded from being a non-concessional contribution under subsection 292-90(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Advice/Answers

Yes, provided a choice to apply section 292-100 of the ITAA 1997 is made in the approved form and given to a complying superannuation fund on or before the time the contribution is made.

This ruling applies for the following period

Year ending 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

Your client is under 55 years of age.

Your client owns one half of a property (the Property) as a tenant in common with another party.

Your client has owned the Property for more than 12 months.

The Property is used wholly in a business carried on by an entity connected to your client.

Your client proposes to make an in specie contribution of the Property to their complying self managed superannuation fund (the Fund).

The transfer of the Property will give rise to a capital gain for your client. However, as the Property is to be contributed to the Fund your client will not receive any proceeds.

It is proposed that the Property will be contributed to the Fund in a single transfer of the title in accordance with the following limits:

§ the part of the Property equal to the amount of your client chooses to disregard under the retirement exemption (that is, the CGT exempt amount) will count towards your client's lifetime CGT cap; and

§ the remaining part of the Property will count towards your client's concessional and non-concessional contributions caps.

Your client proposes to disregard the remaining capital gain, after the 50% discount is applied in accordance with division 115 of the ITAA 1997, under the retirement exemption limit.

Assumptions

The basic conditions in subdivision 152-A of the ITAA 1997 will be satisfied when the Property is transferred to the Fund.

The remaining capital gain will be less than your client's lifetime CGT exemption limit of $500,000.

Other relevant comments

The private ruling request relates to whether an in specie contribution of a property is excluded from being a non-concessional contribution under subsection 292-90(2) of the ITAA 1997. In making our decision we have not considered whether the in specie contribution of the Property will satisfy the in-house asset rules under the Superannuation Industry (Supervision) Regulations 1994 and hence whether it can be accepted by the Fund.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 152-A

Income Tax Assessment Act 1997 Subsection 152-305(1)

Income Tax Assessment Act 1997 Section 292-90

Income Tax Assessment Act 1997 Subsection 292-90(2)

Income Tax Assessment Act 1997 Paragraph 292-90(2)(c)

Income Tax Assessment Act 1997 Subparagraph 292-90(2)(c)(iii)

Income Tax Assessment Act 1997 Section 292-100

Reasons for decision

Summary of decision

Provided that your client makes the choice to apply the small business retirement exemption in the approved form and gives it to their complying self managed superannuation fund (the Fund) on or before the time when the contribution is made the contribution will be excluded from being a non-concessional contribution.

Detailed reasoning

Section 292-90 of the ITAA 1997 sets out what is included in a person's non-concessional contributions for a financial year. Subsection 292-90(2) of the ITAA 1997 states:

A contribution is covered under this subsection if:

(a) it is made in the financial year to a complying superannuation plan in respect of you; and

(b) it is not included in the assessable income of the superannuation provider in relation to the superannuation plan, or, by way of a roll-over superannuation benefit, in the assessable income of any complying superannuation fund or RSA provider in the circumstances mentioned in subsection 290-170(5) (about successor funds); and

(c) it is not any of the following:

...

(iii) a contribution covered under section 292-100 (certain CGT-related payments), to the extent that it does not exceed your CGT cap amount when it is made;

...

Subparagraph 292-90(2)(c)(iii) of the ITAA 1997 excludes from being a non-concessional contribution certain contributions relating to some CGT small business concessions. Section 292-100 of the ITAA 1997 states:

(1) A contribution is covered under this section if:

(a) the contribution is made by you to a complying superannuation plan in respect of you in a financial year; and

(b) the requirement in subsection (2), (4), (7) or (8) is met; and

(c) you choose, in accordance with subsection (9), to apply this section to an amount that is all or part of the contribution.

…

(7) The requirement in this subsection is met if:

(a) the contribution is equal to all or part of the capital gain from a CGT event that you disregarded under subsection 152-305(1); and

(b) the contribution is made on or before the later of the following days:

(i) the day you are required to lodge your income tax return for the income year in which the CGT event happened;

(ii) 30 days after the day you receive the capital proceeds from the CGT event.

…

(9) To make a choice for the purposes of paragraph (1)(c), you must:

(a) make the choice in the approved form; and

(b) give it to the superannuation provider in relation to the complying superannuation plan on or before the time when the contribution is made.

The facts of this case show:

§ the contribution will be made by your client to their complying self managed superannuation fund (the Fund); and

§ the contribution will include a capital gain from a CGT event that your client will disregard under subsection 152-305(1) of the ITAA 1997 as:

o you advise that the basic conditions in subdivision 152-A of the ITAA 1997 will be satisfied when the Property is transferred to the Fund; and

o your client is under 55 years of age; and

o the capital gain your client will disregard will be less than their lifetime CGT retirement exemption limit of $500,000; and

§ the contribution will be made to the Fund in a single transfer.

Therefore, provided that your client makes the choice to apply section 292-100 of the ITAA 1997 in the approved form and gives it to the Fund on or before the time when the contribution is made, all conditions under section 292-100 of the ITAA 1997 will be satisfied.

Where all conditions under section 292-100 of the ITAA 1997 have been satisfied the contribution will be excluded from being a non-concessional contribution under subparagraph 292-90(2)(c)(iii) of the ITAA 1997.

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