Edited version of your written advice

Authorisation Number: 1012996807655

Date of advice: 12 April 2016

Ruling

Subject: Non-concessional contributions

Questions

1. Where the CGT 'small business 15-year exemption' under section 152-105 of the Income Tax Assessment Act 1997 (ITAA 1997) applies, will the in-specie contribution of property made to a complying superannuation fund qualify as a contribution made under section 292-100 of the ITAA 1997 to the extent that it does not exceed your 'CGT cap amount' when it is made?

2. Where the 'small business retirement exemption' under section 152-305 of the ITAA 1997 applies, will the in-specie contribution of property made to a complying superannuation fund qualify as a contribution made under section 292-100 of the ITAA 1997 to the extent that it does not exceed your 'CGT cap amount' when it is made?

3. Will the in-specie contribution of property made to a complying superannuation fund that exceeds your CGT cap amount when the contribution is made count as your non-concessional contribution under section 292-90 of the ITAA 1997?

Answers

1. Yes

2. Yes

3. Yes

This ruling applies for the following periods:

Income year ending 30 June 2016

The scheme commences on:

1 July 2015

Relevant facts and circumstances

You are a sole practitioner trading as a small business (the Business).

The Business has operated continuously for more than 30 years.

You have worked continuously on a full-time basis in the Business.

You are planning to retire in the near future.

You intend to make a contribution to a self-managed superannuation fund (the Fund) by way of transfer of the ownership of a property used exclusively in the operation of the Business.

The Fund is a complying self-managed superannuation fund.

You are the only member of the Fund.

The property is to be transferred to the Fund at market value.

You have previously received a private ruling stating that the transfer of property meets the basic conditions in section 152-10 of the ITAA 1997 so that you are eligible for the CGT small business 15-year exemption under section 152-105 of the ITAA 1997 and the small business retirement exemption under section 152-305 of the ITAA 1997.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 152-105

Income Tax Assessment Act 1997 Section 152-305

Income Tax Assessment Act 1997 Section 292-80

Income Tax Assessment Act 1997 Section 292-90

Income Tax Assessment Act 1997 Section 292-100

Income Tax Assessment Act 1997 Subsection 292-100(1)

Income Tax Assessment Act 1997 Subsection 292-100(2)

Reasons for decision

Summary

Where the CGT small business 15-year exemption applies, the in-specie contribution of property made to a complying superannuation fund will come under section 292-100 of the ITAA 1997 to the extent that it does not exceed your 'CGT cap amount' when it is made. As such, it will not be a non-concessional contribution for the purposes of section 292-90 of the ITAA 1997.

Where the small business retirement exemption applies, the in-specie contribution of property made to a complying superannuation fund up to the amount of capital gain disregarded under that exemption will qualify as a contribution made under section 292-100 of the ITAA 1997 to the extent that it does not exceed your CGT cap amount when it is made. As such, it will not be a non-concessional contribution for the purposes of section 292-90 of the ITAA 1997.

Any amount of in-specie contribution of property made to a complying superannuation fund that exceeds your CGT cap amount when it is made will not come under section 292-100 of the ITAA 1997. Therefore, it will count as your non-concessional contribution for the relevant financial year.

Detailed reasoning

Non-concessional contributions

In accordance with section 292-80 of the ITAA 1997, a person is liable to pay 'excess non-concessional contributions tax' if they have 'excess non-concessional contributions' for a financial year.

An individual has excess non-concessional contributions for a financial year if the amount of their non-concessional contributions exceeds the relevant non-concessional contributions cap for the relevant financial year.

As far as relevant, non-concessional contributions are defined in section 292-90 of the ITAA 1997 as the sum of:

(a) each contribution covered under subsection (2); and …

With certain exceptions, a contribution is covered under subsection 290-90(2) of the ITAA 1997 if it is made in the financial year to a complying superannuation fund in respect of a person and it is not included in the assessable income of the superannuation fund.

Specifically excluded from being covered under subsection 292-90 (2) of the ITAA 1997 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 when it 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:

(a) the contribution is made by you to a*complying superannuation plan in 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.

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

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

(a) the contribution is equal to all or part of the *capital proceeds from a *CGT event for which you can disregard any *capital gain under section 152-105 (or would be able to do so, assuming that a capital gain arose from the event); 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.

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

Subsection 292-100(7) of the ITAA 1997 (the retirement exemption) provides that the requirement in this subsection will be 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.

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

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

(a) make the choice in the approved form; and

(b) give it to the superannuation provider in relation to the complying superannuation plan on or before the time when the contribution is made.

Application to the 15-year exemption

Provided you satisfy the necessary conditions to qualify for the CGT concession under subsections 292-100(1), (2) and (9) of the ITAA 1997, the amount of capital proceeds that qualify for the small business 15-year exemption will be excluded from being a non-concessional contribution up to the CGT cap amount for the relevant year and will reduce your remaining lifetime CGT cap amount.

Application to the retirement exemption

Provided you satisfy the necessary conditions to qualify for the CGT concession under subsections 292-100(1), (7) and (9) of the ITAA 1997, a contribution that does not exceed the amount of the capital gain you disregard under the retirement exemption will be excluded from being a non-concessional contribution up to the CGT cap amount for the relevant year and will reduce your remaining lifetime CGT cap amount.

Importantly, it is only the amount of the capital gain disregarded under the retirement exemption that is excluded from being a non-concessional contribution. Any amount of in-specie contribution that is over and above the amount of capital gain disregarded under the retirement exemption will be counted as non-concessional contributions and will be subject to your non-concessional contribution cap for the relevant financial year.

An amount (if any) that is in excess of your non-concessional contributions cap for the relevant financial year will be subject to excess non-concessional contributions tax.