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Ruling

Subject: Self managed superannuation fund (SMSF) - lodgement and capital gains tax (CGT) - losses

Question

Can the SMSF have the 2010-11 and 2011-12 annual returns flagged as return not necessary?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012.

The scheme commences on:

Year ended 30 June 2010.

Relevant facts and circumstances

The Fund is a self managed superannuation fund (SMSF) and was established during the 2010 income year.

The Fund received rollovers from the trustees in the 2009-10 income year.

The trustees entered into an Agreement with a trader. The Agreement was a non secured loan where the trustees would lend the trader money and could expect to receive monthly interest during the life of the contract.

The trustees transferred money to the trader in the 20YY income year.

The trader told the trustees that their money was gone and soon after died.

The Fund has not lodged annual returns for a number of years.

The end date for lodgement of the 2011-12 annual return is 31 October 2012.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 161

Superannuation Industry (Supervision) Act 1993 Section 35D.

Reasons for decision

The SMSF cannot have their 2010-11 and 2011-12 annual returns flagged as return not necessary.

The Self managed superannuation fund annual return is the approved form for the lodgment of superannuation fund income tax returns and self managed superannuation fund regulatory returns.

All Australian resident superannuation funds must lodge an income tax return from their establishment date, regardless of their income (section 161 of the Income Tax Assessment Act 1936 (ITAA 1936)).

Additionally all regulated self managed superannuation funds must lodge a regulatory return with the Commissioner within the reporting period for a year of income (section 35D of the Superannuation Industry (Supervision) Act 1993 (SISA)).

The trustees made an election for the Fund to be regulated. When the trustees chose to make this election, the Fund became subject to certain requirements under superannuation law. This election is irrevocable.

As stated on the ATO website in the Lodgment Program 2009-10 - details of the program:

Where an SMSF does not have assets set aside for the benefit of members and has not started operating, trustees or tax agents can ask us in writing to either:

· flag their record as 'return not necessary' (RNN) if the SMSF meets all the following conditions

· was registered late in the financial year (April, May or June), and

· was not operating by 30 June 2010

· has not received contributions or rollover amounts by 30 June

The fund was registered in the 20YY income year and commenced operations in the 2010-11 income year as demonstrated by its receipt of rollovers in this period.

The SMSF does not meet the criteria for the annual return to be flagged as not necessary for any income year.

Therefore under section 161 of the ITAA 1936 and section 35D of the SISA the Fund is required to lodge an annual return for the 2009-10, 2010-11 and 2011-12 income years and all subsequent income years in which it exists.