Edited version of private advice

Authorisation number: 1052374284790

Date of advice: 1 April 2025

Subject: CGT - small business

Question

Will a superannuation contribution qualify as a capital gains tax (CGT) small business 15-year exemption contribution under subsection 292-100(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

This advice applies for the following period:

Year ending 30 June 20YY

Relevant facts and circumstances

You were the sole director of the Company.

The Company own assets for more than 15 years continuously.

On DD MM YYYY the Company entered into an Agreement for the sale of the assets.

On DD MM YYYY, a payment was made to the Company's bank account.

You were over 55 years of age at the time of sale.

On DD MM YYYY the Company made a payment to your personal bank account, as a CGT concession stakeholder, in relation to your retirement.

You lodged a Capital gains tax cap election form with your superannuation Fund on DD MM YYYY to treat a contribution as a 'Small business 15-year exemption amount'.

Assumptions

The assets satisfy the criteria for the 15-year exemption for companies.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-110

Income Tax Assessment Act 1997 section 152-125

Income Tax Assessment Act 1997 section 292-90

Income Tax Assessment Act 1997 section 292-100

Income Tax Assessment Act 1997 section 292-105

Summary

The contribution to your superannuation fund does not meet the timeframe requirements under subsection 292- 292-100(4) of the ITAA 1997. The contribution will not be a CGT small business 15-year exemption contribution and is, therefore, a non-concessional contribution.

Reasons for decision

15-year exemption

In accordance with section 152-110 of the ITAA 1997 a company can disregard a capital gain from a CGT event happening to a CGT asset if the company:

•                     satisfies the basic conditions for the CGT small business concessions as per Subdivision 152A

•                     continuously owned the CGT asset for the 15-year period ending just before the CGT event happened.

If you are a significant individual of the company, you must have been:

•                     at least 55 years old and the CGT event happened in connection with your retirement, or

•                     permanently incapacitated at the time of the CGT event.

You have stated that the criteria for the 15-year exemption have been met.

CGT lifetime cap

If an individual makes a contribution to their superannuation fund with the intent of disregarding all or part of the capital gain under the CGT small business concessions, they may also be eligible to exclude all or part of that contribution from counting against their non-concessional cap and instead be counted against their CGT cap under section 292-105 of the ITAA 1997.

An individual's lifetime CGT contribution cap is $1,780,000 for the 2024-25 year of income and it operates separately from the non-concessional contribution cap.

Paragraph 292-90(2)(c) of the ITAA 1997 provides for certain types of contributions to be excluded from being considered a non-concessional contribution. One such contribution is a contribution covered under section 292-100 relating to certain CGT-related payments, to the extent that it does not exceed your CGT cap amount when it is made.

Subsection 292-100(1) of the ITAA 1997 states that a contribution is covered under this section if it is:

a)            a contribution made by an individual to a fund in respect of the individual

b)            the requirement in subsections (2), (4), (7) or (8) are met, and

c)            the individual chooses 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 152-110 of the ITAA 1997, (15 years exemption for companies and trusts), subsection 292-100(4) of ITAA 1997 is the appropriate subsection to consider. The individual must be a CGT concession stakeholder of the entity, which includes a significant individual in a company. Paragraph 292-100(4)(b) requires the entity to make a payment to the individual before the later of:

i.                two years after the CGT event; and

ii.                if the CGT event happened because the entity disposed of the relevant CGT asset - 6 months after the latest time possible a financial benefit becomes or could become due under a look- through earnout right relating to that CGT asset and the disposal

In accordance with paragraph 292-100(4)(c) of the ITAA 1997, the amount of the contribution is limited to your stakeholder's participation percentage of the capital proceeds. The capital proceeds include circumstances where the disposal results in no capital gain or a capital loss, and is not limited to a capital gain. Paragraph 292-100(4)(d) then requires the contribution is made to the fund within 30 days after the payment mentioned in paragraph 292-100(4)(b).

The choice to exclude the contribution from being a non-concessional contribution will only be valid if it is made in the approved form and given to the fund on or before the time the contribution is made.

In your case, the Company entered into the Agreement for the sale of the assets on DD MM YYYY The proceeds from the sale were made to the Company on DD MM YYYY.

Selling or disposing of an asset will trigger a CGT event. Under subsection 104-10(3) of the ITAA 1997, the CGT event is when you enter the contract for the disposal of the asset - in this case on DD MM YYYY.

The Company paid you, as the CGT concession stakeholder, the amount of $xxxx on DD MM YYYY. As the payment to you was more than two years after the sale of the assets (the CGT event), the period for making the CGT small business 15-year exemption contribution has elapsed.

Subsequently, the contribution you made to the Fund on DD MM YYYY will be a non-concessional contribution.