Private ruling: Concessional contributions cap - CGT retirement exemption
Published: June 2012
Ruling period: Year ending 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Does a contribution to the Fund from the proceeds of the sale of a property count towards your client's non-concessional contributions cap? After contributing an amount, as above, can your client make a further non-concessional contribution to the Fund? Advice/Answers No. Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 152-105 | Income Tax Assessment Act 1997 Section 292-80 | Income Tax Assessment Act 1997 Subsection 292-85(2) | Income Tax Assessment Act 1997 Subsection 292-85(3) | Income Tax Assessment Act 1997 Subsection 292-85(4) | 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(1) | Income Tax Assessment Act 1997 Subsection 292-100(2) | Income Tax Assessment Act 1997 Subsection 292-100(9)

Reasons for decision: Detailed Reasoning - Summary of decision: Your client's contribution to the Fund from the proceeds of the sale of a farm is excluded from being counted towards your client's non-concessional contributions cap for the 2011-12 income year. Your client will be eligible for and trigger the bring-forward provisions in the 2011-12 income year and make a further non-concessional contribution to the Fund. | Detailed Reasoning - Non-concessional contributions cap: Non-concessional contributions made to a complying superannuation fund will be subject to an annual cap (subsection 292-85(2) of the Income Tax Assessment Act 1997 (ITAA 1997)). For a person who is 50 years of age or more their non-concessional contributions cap for the 2011-12 income year is $150,000. Non-concessional contributions include: · personal contributions for which an income tax deduction is not claimed; · contributions a person's spouse makes to their superannuation fund account; and · transfers from foreign superannuation funds (excluding amounts included in the fund's assessable income). A taxpayer will be taxed on non-concessional contributions over the cap at the rate of 46.5% (section 292-80 of the ITAA 1997). | Detailed Reasoning - Exclusions from the non-concessional contributions cap: Paragraph 292-90(2)(c) of the ITAA 1997 lists contributions which are specifically excluded from being non-concessional contributions. We will consider subparagraph 292-90(2)(c)(iii) of the ITAA 1997 which specifically excludes from being a non-concessional contribution a contribution covered under section 292-100 (certain CGT-related payments), to the extent that it does not exceed a persons CGT cap amount when it is made. To qualify for the CGT concession certain conditions must be met under subsection 292-100(1) of the ITAA 1997 which states: A contribution is covered under this section if: · the contribution is made by you to a complying superannuation plan in respect of you in a financial year; and · the requirement in subsection (2), (4), (7) or (8) is met; and · you choose, in accordance with subsection (9), to apply this section to an amount that is all or part of the contribution. Subsection 292-100(2) of the ITAA 1997 states: The requirement in this subsection is met if: · 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 · the contribution is made on or before the later of the following days: · the day you are required to lodge your income tax return for the income year in which the CGT event happened; · 30 days after the day you receive the capital proceeds. Section 152-105 of the ITAA 1997 states: If you are an individual, you can disregard any capital gain arising from a CGT event if all of the following conditions are satisfied: · the basic conditions in Subdivision 152-A are satisfied for the gain; · you continuously owned the CGT asset for the 15-year period ending just before the CGT event; · if the CGT asset is a share in a company or an interest in a trust - the company or trust had a significant individual for a total of at least 15 years (even if the 15 years was not continuous and it was not always the same significant individual) during which you owned the CGT asset; · either: · you are 55 or over at the time of the CGT event and the event happens in connection with your retirement; or · you are permanently incapacitated at the time of the CGT event. | Detailed Reasoning - The Bring Forward Provisions: For a person who is 50 years of age or more their transitional concessional contribution cap for the 2011-12 income year is $50,000, and their non-concessional contributions cap is $150,000. However, subsections 292-85(3) and (4) of the ITAA 1997 ('the bring-forward provisions') provide that the non-concessional contributions cap is calculated differently if certain conditions are satisfied. Subsection 292-85(3) of the ITAA 1997 states: However, subsection (4) applies instead of subsection (2) in determining your non-concessional contributions cap for a financial year (the first year ) if: · your non-concessional contributions for the first year exceed the amount mentioned in subsection (2) for that year; and · you are under 65 years at any time in the first year; and · a previous operation of subsection (4) does not determine your non-concessional contributions cap for the first year. Therefore, a person who is under 65 years of age at any time during the income year who makes non-concessional contributions that exceed the non-concessional contributions cap specified under subsection 292-85(2) of the ITAA 1997, would trigger the bring-forward provisions and their non-concessional cap would be calculated in accordance with subsection 292-85(4) of the ITAA 1997. In this case, the Fund is a complying superannuation fund. Your client intends to make a non-concessional contribution to a complying fund (the Fund) from the proceeds of the sale of property. In addition, your client has continuously owned the property for over 15 years, your client is over age 55 and the contribution will be made on or before the later of the day they are required to lodge their income tax return for the 2011-12 income year and 30 days after the day they receive the capital proceeds. In light of the above your client satisfies the conditions under section 292-100(1) of the ITAA 1997 provided that the requirements in subsection 292-100(9) of the ITAA 1997 are met. In order to make the choice for the purposes of paragraph 292-100(1)(c) of the ITAA 1997, the person must, in accordance with subsection 292-100(9): · make the choice in the approved form; and · give it to the superannuation provider in relation to the complying superannuation plan on or before the time when the contribution is made. Therefore, subparagraph 292-90(2)(c)(iii) of the ITAA 1997 applies to specifically exclude the contribution from being counted towards your client's non-concessional contributions cap for the 2011-12 income year. Please note the above contribution can only be excluded from the non-concessional contributions cap to the extent that they do not exceed the CGT cap amount. The CGT cap is a lifetime limit which is indexed annually. For the 2011-12 income year the CGT cap amount is $1,205,000. 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. You state that after contributing the amount, as above, your client intends to make a further non-concessional contribution to the Fund. Your client will be under 65 years of age during the 2011-12 (the first year) income year and has not already triggered the bring forward provision. Therefore, your client will be eligible for and trigger the bring-forward provisions in the 2011-12 income year. Your client will trigger the bring-forward provision when they make a non-concessional contribution in excess of $150,000 and up to $450,000. This means two future years' entitlements up to the bring forward residual amount can be made in the 2012-13 and 2013-14 income years without breaching the non-concessional contributions caps for those income years.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Relevant facts: Your client is a member of a complying superannuation fund (the Fund). | Your client intends to make a non-concessional contribution to the Fund, a complying fund from the proceeds of the sale of property. | Your client intends to make a further non-concessional contribution to the Fund and trigger the bring forward provision. | Your client has not already triggered the bring forward provision. | The contribution will be made on or before the later of the day your client is required to lodge their income tax return for the 2011-12 income year and 30 days after the day they receive the capital proceeds. | Your client is over age 55 and under age 65 in the 2011-12 income year.