Edited version of administratively binding advice

Authorisation Number: 1012448083687

Advice

Subject: Non-concessional contributions cap

Question 1

Is the payment of the proceeds of the sale of a house made into a self-managed superannuation fund (SMSF) a superannuation contribution?

Advice

Yes.

Question 2

Can the payment of the proceeds of the sale of a house made into a SMSF be withdrawn when no condition of release has been met?

Advice

Not valid. Only general advice is provided.

This advice applies for the following period

Year ended 30 June 2012

The arrangement commenced on

1 July 2011

Relevant facts and circumstances

Your advice is based on the facts stated in the description of the scheme that is set out below. If your circumstances are significantly different from these facts, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice.

You are a member and the trustee of a self-managed superannuation fund (the Fund).

You are the director of a private Australian company (the Company).

You have stated that the sale of your property occurred during the relevant income year.

You received proceeds from the sale of the property during the relevant income year.

The proceeds were deposited into your business superannuation account.

During the subsequent income year, you rolled over two portions of the proceeds from the sale of your property from your business superannuation account into your SMSF.

During the subsequent income year, you also tried to purchase shares from one of your bank accounts (bank account X) and realised that you were not able to as it was an SMSF account.

During the 20XX income year, you were advised by the bank that the proceeds from the sale of property were deposited into your SMSF account and would be treated as a member contribution.

You have stated that you were not aware that bank account X was set up as a SMSF account and was not a personal account.

You also have a credit card with the bank which you use solely for transactions for your business.

You are under 65 years of age.

Your concessional contributions cap for the subsequent income year is $25,000.

Your non-concessional contributions cap for the subsequent income year is $150,000.

Reasons for decision

Summary

The payments made by you to the Fund during the subsequent income year are contributions for the purposes of the ITAA 1997.

The Commissioner cannot rule on the issue of whether the payment of the proceeds of the sale of a house incorrectly made into a self-managed superannuation fund can be withdrawn when no condition of release has been met as this relates to a provision of an Act or regulation that is not administered by the Commissioner. However, general advice has been provided.

Detailed reasoning

1. Is the payment of the proceeds of the sale of a house made into a SMSF a superannuation contribution?

Superannuation contributions

The ITAA 1997 does not define the term 'contribution'. Therefore it is necessary to ascertain the meaning of a 'contribution' to a superannuation fund having regard to the context and underlying purpose of the legislative provisions in which the term appears.

Generally, a superannuation fund's capital is increased by transferring funds to the superannuation provider and, as a general rule, the contribution will be made when the funds are received by the superannuation provider.

The Commissioner of Taxation (the Commissioner) sets out his view on the meaning of 'contribution' in Taxation Ruling TR 2010/1 (TR 2010/1). Paragraph 126 of the TR 2010/1 states:

A contribution is anything of value that increases the capital of a superannuation fund provided by a person whose purpose is to benefit one or more particular members of the fund or all of the members in general.

Paragraph 10 of TR 2010/1 states:

The capital of a superannuation fund may be increased directly by:

· transferring funds to the superannuation provider;

· rolling over a superannuation benefit from another superannuation fund;

Furthermore, paragraph 17 of TR 2010/1 states:

A roll-over superannuation benefit (other than a superannuation benefit that is paid from one superannuation interest of a member in a superannuation plan to another interest of that member in the same plan) and a transfer of a person's benefits from an overseas superannuation fund to an Australian superannuation provider, however made, is a contribution as it increases the capital of the fund in the same way as any other transfer of funds or assets and is made to obtain superannuation benefits for a particular individual.

In this case, you stated that you received a lump sum from the sale of your property which you transferred into the Company's Super account. You subsequently rolled over separate amounts of $X and $Y into your SMSF's bank account. You stated that you were not aware that this account was set up as a SMSF and believed that it was a personal account. However, documentation provided show that you held personal accounts with another Bank and that there were no other transactions of a personal nature that were conducted using your SMSF's account. Furthermore, a statement for the SMSF's account for the subsequent financial year shows that regular contributions were made into the account by the Company which clearly indicates that the account was set up as a SMSF account and not a personal account.

Accordingly, the payments of $X and $Y made by you to the Fund are contributions for the purposes of the ITAA 1997.

2. Can the payment of the proceeds of the sale of a house made into a SMSF be withdrawn when no condition of release has been met?

Under certain circumstances, the Commissioner may decline to make a private ruling on a particular issue.

The Commissioner must comply with a private ruling application under section 359-35 of Schedule 1 of the Tax Administration Act 1953 (TAA) unless there is a basis to decline to make the ruling. The Commissioner can only provide a ruling for provisions of Acts and regulations that he administers and are directly covered by section 357-55 of Schedule 1 to the TAA.

The Commissioner may decline to make a private ruling if it is in relation to a provision of an Act or regulation that is not administered by the Commissioner.

In the present case you have asked the Commissioner to make a private ruling that requires him to provide specific advice on self-managed superannuation funds. Accordingly, the Commissioner declines to make a ruling on the matter that you have raised.

However, the following general advice is provided which, while not binding on the Commissioner, the Australian Tax Office (ATO) will stand by and will not depart from unless:

· the law has changed since the advice was given;

· a final court decision has affected our interpretation of the law since the advice was given; or

· for any reason, the advice is no longer considered appropriate - for example, if commercial practice has changed, the advice has been exploited in an abusive and unintended way or the advice is found on reconsideration to be wrong in law.

Generally, a recipient who is aged under preservation age must meet a condition of release in order to access their superannuation benefits. Conditions of release that may apply to a person in a disaster include: compassionate grounds, severe financial hardship, temporary incapacity, permanent incapacity or death. A recipient who satisfies one of these conditions may be able to access their superannuation benefits early. However, they are generally not able to treat it as tax-free.