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Edited version of your written advice
Authorisation Number: 1051502744520
Date of advice: 16 April 2019
Ruling
Subject: Superannuation contributions – CGT small business 15-year exemption – CGT cap
Question1
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 (the 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?
Question 2
Will the in-specie contribution of the 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?
Answer 1
Where the CGT small business 15-year exemption applies, the in-specie contribution of the 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.
Answer 2
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.
This ruling applies for the following:
Year ending 30 June 2020
The scheme commences on:
1 July 2018
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.
You own a Property valued at $X on which a business is run.
The CGT caps for the 2018-19 and 2019-20 financial years are $1,480,000 and $1,515,000 respectively.
The business has run continuously for a period of greater than 15 years.
You are over 55 years of age.
You intend to make an in-specie contribution of the Property to a complying self-managed superannuation fund.
Your agent has advised that you are eligible for the small business 15-year exemption under section 152-105 of the ITAA 1997 which requires you to have met the basic conditions for relief in section 152-10 of the ITAA 1997.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 152-10
Income Tax Assessment Act 1997 Section 152-105
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 Section 292-105
Income Tax Assessment Act 1997 Subsection 292-100(1) and (2)
Summary
1. 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.
2. 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 and the CGT cap
3. 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.
4. 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.
5. 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 …
6. 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.
7. 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.
8. The CGT cap, as defined under section 292-105 of the ITAA 1997, is a lifetime limit which is indexed annually. The CGT caps for the 2018-19 and 2019-20 financial years are $1,480,000 and $1,515,000 respectively. 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.
9. 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.
10. 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.
11. 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.
12. Accordingly, 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.