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Edited version of your private ruling
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Ruling
Subject: Capital gains tax - transfer of shares to self managed superannuation fund
Question:
Is the capital gain or capital loss made on transferring your shares to your self managed superannuation fund (SMSF) disregarded?
Answer:
No.
This ruling applies for the following period
Year ended 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
In 2001 you purchased shares in your name.
You will transfer these shares into your SMSF.
Your SMSF is a single member fund.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-60
Income Tax Assessment Act 1997 Section 106-50
Income Tax Assessment Act 1997 Section 116-30
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
A superannuation fund is considered to be a trust and as such fits into the general definition of a trust. Assets are held in the superannuation fund for the future benefit of the named recipients of the fund. However, unlike a normal trust, members in a superannuation fund do not have the same rights to entitlement as most beneficiaries in a trust. This is because members of a superannuation fund do not have the same absolute entitlement to the assets.
In superannuation funds, members have the right to receive benefits from the fund, rather than being absolutely entitled to the assets themselves. Once they place assets into the superannuation fund, they give up their claim to that asset until the fund ceases to function. Accordingly, capital gains tax (CGT) events relating to trusts must be considered. The event that is applicable in your circumstances is CGT event E2 - transferring a CGT asset to a trust. The time of the event is when the shares are transferred into the superannuation fund.
Upon the transfer of the shares into your own superannuation fund, both the legal and beneficial ownership of those shares changes. This is because you are no longer able to access the shares in your fund even though you still receive the benefits arising from the shares held by that fund.
A CGT event E2 is only disregarded if:
· you are the sole beneficiary of the trust, and
· you are absolutely entitled to the asset as against the trustee (disregarding any legal disability), and
· the trust is not a unit trust, or
· you transfer the asset from another trust and the beneficiaries and the terms of both trusts are the same.
In your case, your shares are being transferred into your superannuation fund. As it has already been established above, members of a superannuation fund do not have absolute entitlements to the assets in the fund, rather they have a right to receive benefits from the fund.
Therefore, the transfer of the shares into your SMSF will trigger a CGT event E2 that cannot be disregarded. Accordingly, you will need to determine the capital gain or capital loss on the transfer of your shares.
There are special rules that apply if you did not receive any capital proceeds to dispose of a CGT asset, you are deemed to have disposed of the asset for its market value on the date of transfer.
As you will not receive any consideration for the disposal of your shares, you will be taken to have disposed of the shares for their market value at the time of the transfer.
The date of disposal will be when the shares are transferred to your SMSF.