Edited version of private advice

Authorisation Number: 1051524762960

Date of advice: 3 June 2019

Ruling

Subject: Non-concessional contributions and CGT small business concessions

Question

Would a contribution made within 30 days after the date of settlement constitute a valid contribution for the purposes of subsection 292-100(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

This advice applies for the following periods:

Year ended 30 June 2018

Year ending 30 June 2019

Year ending 30 June 2020

Year ending 30 June 2021

The arrangement commences on:

1 July 2017

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.

Your client and their spouse owned land and have used the land principally in a primary production business carried on by them in partnership.

In the 2017-18 income year the land was sold and has a settlement date in the 2020-21 income year.

The contract of sale provided for the payment of an initial deposit and the balance of the purchase price payable at the date of settlement.

The land is considered a capital asset and the total amount of the capital gain will be exempt from capital gains tax (CGT). [Part of the capital gain arising from the CGT event was disregarded under the small business 15-year exemption].

Your client intends to use part of the sale of proceeds from the sale of the land to make superannuation contributions.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 103-10

Income Tax Assessment Act 1997 Paragraph 103-10(2)(b)

Income Tax Assessment Act 1997 Subsection 116-20(1)

Income Tax Assessment Act 1997 Section 152-105

Income Tax Assessment Act 1997 Paragraph 292-90(2)(c)

Income Tax Assessment Act 1997 Section 292-100

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

Income Tax Assessment Act 1997 Paragraph 292-100(2)(a)

Income Tax Assessment Act 1997 Paragraph 292-100(2)(b)

All references are to the ITAA 1997 unless otherwise indicated.

Reasons for decision

Summary

As your client satisfies the conditions under section 292-100, they can choose to exclude a proposed contribution from their non-concessional contributions if they make the contribution within 30 days after the date of settlement.

To the extent that the contribution does not exceed their CGT cap amount when it is made, the contribution will not be a non-concessional contribution.

Detailed reasoning

Contributions excluded from being non-concessional contributions

Under paragraph 292-90(2)(c) a contribution is excluded from being a non-concessional contribution, if the contribution is covered under section 292-100 to the extent that it does not exceed the CGT cap amount when it is made.

As your client is eligible for the small business retirement exemption in relation to the disposal of a small business asset, your client can choose to contribute some of the proceeds from the sale of the asset to a complying superannuation fund if the requirements of section 292-100 are satisfied.

Subsection 292-100 states that a contribution is covered under this section if:

(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.

Where an individual intends to disregard any capital gain resulting from a CGT event under section 152-105 (15 year exemption for individuals), subsection 292-100(2) is the appropriate subsection to consider.

Paragraph 292-100(2)(a) states that the contribution to the fund is to be equal to all or part of the 'capital proceeds'.

Paragraph 292-100(2)(b) requires an individual to make the contribution before the later of the following days:

·        the day they are required to lodge their income tax return for the income year in which the CGT event happened;

·        30 days after the day they receive the capital proceeds.

The 'capital proceeds' from a CGT event are defined in subsection 116-20(1) and for the purposes of this case, includes money received or are entitled to receive, in respect of the event happening.

An entitlement to the receipt of money or property is defined in section 103-10. Paragraph 103-10(2)(b) provides that if the taxpayer will not receive money or other property in relation to a CGT event until a later time, including a situation where money is payable by instalments, then the taxpayer is treated as if they are entitled to receive that money or property.

Therefore, as your client is expected to receive the balance of the proceeds from the sale of the asset on settlement date, this further amount that will be received forms part of the 'capital proceeds' as per subsection 116-20(1).

Accordingly, your client can choose to make a contribution(s) (in the approved form) up until the 30 days after the day they receive the capital proceeds for the purposes of subsection 292-100(2), as this date is the later of the day your client is required to lodge their 2018 income tax return and 30 days after the day they receive the capital proceeds.

To the extent that the contribution does not exceed your client's CGT cap amount when it is made, the contribution will not count towards your client's non-concessional contributions cap for the relevant income year.