Private ruling: Capital gains tax - donate commercial properties to self managed superannuation fund
Published: August 2013
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Will capital gains tax (CGT) apply when you donate your jointly commercial properties to a self-managed superannuation fund (SMSF)? | A1: Yes.

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 and your spouse jointly own commercial properties. You and your spouse will donate these properties to your joint SMSF. You have supplied documentation to support your application and this documentation is to be read with and forms part of your application for the purpose of this ruling.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-60.

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. A capital gain or capital loss may arise if a CGT happens to a CGT asset, such a commercial property. CGT event E2 will occur when you transfer a CGT asset to a trust. A superannuation fund is considered to be a trust, and as such fits into the general definition of a trust. Assets are held in the superannuation fund for the future benefit of the named recipients of the fund. However, unlike a normal trust fund, members in a superannuation fund do not have the same rights of entitlement as most beneficiaries in a trust. This is because members of a superannuation fund do not have the same absolute entitlement to the assets. In superannuation funds, members have the right to receive benefits from the fund, rather than being absolutely entitled to the assets themselves. Once they place the assets into the superannuation fund, they give up their claim to that asset until the fund ceases to function. The commercial properties you have an ownership interest in are CGT assets and a change of ownership will occur when you and your spouse donate them to your joint SMSF. Upon the transfer of your interests in the commercial properties to your SMSF a CGT event E2 will occur. You will make a capital gain if the market value of the properties at the time of transfer is greater than the cost base of the properties. You will make a capital loss if the market value is less than the reduced cost base of the properties. There is no exemption or rollover for a capital gain you make when you transfer an asset into a superannuation fund.