Edited version of your written advice

Authorisation Number: 1013035211258

Date of advice: 17 June 2016

Ruling

Subject: Non concessional contributions

Question 1

Is the proposed contribution of part of the capital proceeds from the sale of a small business property excluded from the taxpayer's non-concessional contributions cap?

Answer 1

Yes

This advice applies for the following period:

Income year ending 30 June 2016.

The arrangement commences on:

1 July 2015.

Relevant facts and circumstances

1. You sold an asset, and from these proceeds you and your spouse each made a contribution into your respective superannuation accounts in the income year.

2. You made a capital gain on the sale amount.

3. You seek to understand whether you may invest the capital gain into a superannuation account, and have it excluded as a non-concessional contribution as you have already contributed certain amounts in the income year.

4. You confirmed that you qualify for the Capital Gains Tax small business retirement exemption up to a limit of $500,000.

5. You confirmed that you have chosen to apply the small business retirement exemption under subdivision 152-D of the Income Tax Assessment Act 1997 (ITAA 1997).

6. You advised that you have made no previous claims under the retirement exemption lifetime limit of $500,000.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 103-25

Income Tax Assessment Act 1997 Section 292-90

Income Tax Assessment Act 1997 Section 292-100

Reasons for decision

Summary

You may choose for the proposed contribution to be covered under section 292-100 of the Income Tax Assessment Act 1997 (ITAA 1997). If you do, it will be excluded from being a non-concessional contribution.

Detailed reasoning

Subsection 292-90(2) of the ITAA 1997 outlines the meaning of a non-concessional contribution.

Non-concessional contributions and amounts

(2) 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) or subsection 290-170(6) (about MySuper products); and

(c) it is not any of the following:

(i) a Government co-contribution made under the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 ;

(ii) a contribution covered under section 292-95 (payments that relate to structured settlements or orders for personal injuries);

(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;

(iv) a contribution made to a * constitutionally protected fund (other than a contribution included in the * contributions segment of your * superannuation interest in the fund);

(v) contributions not included in the assessable income of the superannuation provider in relation to the superannuation plan because of a choice made under section 295-180;

(vi) a contribution that is a * roll-over superannuation benefit.

*To find definitions of asterisked terms, see the Dictionary, starting at section 995-1

Subparagraph 292-90(2)(c)(iii) of the ITAA 1997 states that a non-concessional contribution is not a contribution covered under section 292-100 of the ITAA 1997 to the extent that it does not exceed the Capital Gains Tax (CGT) cap amount.

Subsection 292-100(1) of the ITAA 1997 states that a contribution is covered under this section if:

(a) The contribution is made by you to a complying superannuation plan is 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

Of the subsections listed above under paragraph 292-100(1)(b) of the ITAA 1997, only subsection 292-100(7) of the ITAA 1997 is relevant to this case as it refers to the CGT small business retirement exemption for individuals under subsection 152-305(1) of the ITAA 1997.

Contribution relating to some CGT small business concessions

(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.

In this case, you have chosen to apply the small business retirement exemption and disregard an amount of capital gain under subsection 152-305(1) of the ITAA 1997.

If the proposed contribution is equal to all or part of the amount you have chosen to disregard, you may choose to apply section 292-100 of the ITAA 1997 to the proposed contribution. According to subsection 292-100(9) of the ITAA 1997, this choice must:

• Be in the approved form; and

• Be given to the superannuation provider on or before the time when the contribution is made

The approved form is the Capital gains tax cap election form (NAT 71161) available on the Australian Taxation Office website.

If you choose to apply section 292-100 of the ITAA 1997 to the proposed contribution, it will be a contribution covered under section 292-100 of the ITAA 1997 and thus will not be a non-concessional contribution (thus allowing you to remain inside the contribution cap).

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