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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of private advice

Authorisation Number: 1012627541517

Ruling

Subject: CGT Cap

Question 1

Will the proposed in-specie contribution of post capital gains tax (CGT) property made to a complying superannuation fund qualify for the CGT cap pursuant to subsection 292-100(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provided the contribution is made by the relevant date and is on the approved form?

Answer

Yes

Question 2

Will the proposed in-specie contribution of pre CGT property made to a complying superannuation fund qualify for the CGT cap pursuant to subsection 292-100(2) of the ITAA 1997 provided the contribution is made by the relevant date and is on the approved form?

Answer

Yes

Question 3

Can the CGT event, choice to disregard all the gain and the contribution of the property all occur simultaneously?

Answer

Yes

Relevant facts and circumstances

You and your partner are considering transferring real property owned individual into the Self-managed Super Fund.

You were born in 19xx.

Your partner was born in 19xx.

You will both satisfy the work test for the 2014 financial year.

You carry on an enterprise and will satisfy the requirements of the Small Business 15 year exemption.

You are considering transferring the following properties at a market value determined by a qualified independent third party:

All the properties are real property used in the enterprise you carry on. No part of the properties greater than two hectares is used for private purposes.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 292-100

Superannuation (Industry) Supervision Act 1993 section 66

Reasons for decision

Summary

The proposed in-specie transfer of post and pre CGT property to a complying superannuation fund will satisfy all the requirements of section 292-100 of the ITAA 1997 as you will be transferring business real property eligible for the small business 15 year exemption at market value, this is provided that the contribution is made on the relevant date and on the approved form, and only to the extent that it does not exceed your CGT cap amount.

The relevant date in this instance will be the date the property is transferred to the superannuation fund. This will also be the date whereby you are required to make the choice and lodge the approved form with your superannuation provider.

In specie transfer of business real property

Section 285-5 of the ITAA 1997 provides that a superannuation contribution can be made by transferring property to the superannuation provider (an in-specie contribution) providing the payment is or includes the market value of the property.

Subsection 66(1) of the Superannuation (Industry) Supervision Act 1993 (SISA) provides that subject to subsection (2), a trustee or an investment manager of a regulated superannuation fund must not intentionally acquire an asset from a related party of the fund. Subsection 66(2) of the SISA explains that subsection (1) does not prohibit a trustee or investment manager acquiring an asset from a related party of the fund if the fund is a superannuation fund with fewer than 5 members and the asset is business real property of the related party acquired at market value.

Subsection 66(5) of the SISA states that business real property in relation to an entity is defined as meaning:

where the real property is used wholly and exclusively in one or more businesses (whether carried on by the entity or not), but does not include any interest held in the capacity of a beneficiary of a trust estate.

Subsection 116-30(1) of the ITAA 1997 provides that if you received no capital proceeds from a CGT event, you are taken to have received the market value of the CGT asset that is the subject of the event (the market value is worked out as at the time of the event).

In cases where a taxpayer has directed that the proceeds from the disposal of the property to their superannuation fund be credited to their member account in the superannuation fund, they are taken to have received money or other property if it has been applied for their benefit or as they direct (subsection 103-10(1) of the ITAA 1997).

ATO Interpretative Decision ATO ID 2010/217 discusses the transfer of real property to a superannuation fund to satisfy the payment of the CGT retirement exemption amount. It explains that, for an individual, the transfer of real property to a complying superannuation fund satisfies the contribution required under the retirement exemption as long as the transfer satisfies the relevant provisions of the SISA.

While the CGT retirement exemption concession is a separate concession to the CGT 15-year exemption concession, it is considered that the Commissioner's view on the transfer of real property for the retirement exemption will also apply to the 15-year exemption.

In your case:

Therefore, the property can be transferred to your SMSF if you wish to do so.

CGT Cap - exclusion from non-concessional contributions cap

Section 292-90 of the ITAA 1997 explains that some contributions are specifically excluded from being non-concessional contributions. One of the contributions that is excluded is a contribution covered under section 292-100 of the ITAA 1997 (certain CGT related payments) to the extent that it does not exceed the CGT cap amount ($1,315,000 for the 2013-14 financial year) when the contribution is made.

The CGT cap is a lifetime limit which is indexed annually. The CGT cap is reduced by the amount of each contribution that a person has elected to be covered by the exemption from the non-concessional contributions cap under section 292-100 of the ITAA 1997.

To qualify for the CGT concession under subsection 292-100(1) of the ITAA 1997 certain conditions must be met. These are:

Subsection 292-100(2) of the ITAA 1997 (about the 15 year exemption) provides that the requirement in this subsection will be met if:

Subsection 292-100(5) operates to treat a pre-CGT asset as a post-CGT asset for the purpose of determining the requirement of subsection 292-100(20 of the ITAA 1997.

Subsection 292-100(9) of the ITAA 1997 explains that to make a choice for the purposes of paragraph 292-100(1)(c), you must:

Application to you circumstances

As previously discussed you will not be precluded from transferring the property in-specie to your SMSF under the SISA, as the property will be business real property and the transfer will be at market value.

You have provided that you will be eligible for the 15 year exemption and consequently you will satisfy paragraph 292-100(2) of the ITAA 1997.

Therefore, provided you satisfy the other necessary conditions to qualify for the CGT concession under subsection 292-100(9) of the ITAA 1997, to the extent that the market value of the property is under the CGT cap amount for the relevant year, the value of the property will be excluded from being a non-concessional contribution in your superannuation fund.


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