Private ruling: Non-concessional contribution cap - CGT small business concessions
Date of advice: 12 October 2015
Published: October 2015

Ruling: Issue 1 | 1. Will the contribution the Taxpayer makes to their superannuation fund, in respect of the sale of their property, meet the requirements of a contribution made under section 292-100 of the Income Tax Assessment Act 1997 (ITAA 1997)? | 2. Will the contribution the Taxpayer makes to their superannuation fund, in respect of the sale of the Trust's property, meet the requirements of a contribution made under section 292-100 of the ITAA 1997? | Advice | 1. Yes. | 2. No.

Relevant facts and circumstances: During the 20VV-WW income year, the Taxpayer and related entities entered into a contract to dispose of their property. One of the properties disposed of was held solely by the Taxpayer and another disposed property was held by the trustee of a Trust (the Trust). The Taxpayer has a 50% stakeholder participation in the Trust which matches the pattern of distributions from the Trust. The Taxpayer is over 55 years old. The property disposed of by the Taxpayer was acquired before 20 September 1985. The property disposed of by the Trust satisfies the CGT small business 15-year exemption under Subdivision 152B of the ITAA 1997. It is stated that all assets in question fall within the definition of an active asset test and that the Taxpayer is eligible for the small business retirement exemption. During the 20XX-YY income year, the Taxpayer received a payment from the Trust equal to 50% of the total proceeds received upon repayment of the vendor finance loan. Within 30 days of the receipt of the payment, the Taxpayer intends to make a contribution to a superannuation fund (the Fund) equal to a part of the capital proceeds received from the sale of the Taxpayer's property and part of the proceeds received from the Trust's property. The Fund is a complying superannuation fund. On or before the Taxpayer makes the contributions, the Taxpayer will notify the Fund that contributions are to be excluded from their non-concessional contributions cap and have them count towards their superannuation CGT cap amount instead. The Taxpayer has not previously utilised any of their lifetime CGT cap amount. The Taxpayer will satisfy the work test in the 20XX-YY income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 152B | Income Tax Assessment Act 1997 Section 292-90 | Income Tax Assessment Act 1997 Section 292-100 | Income Tax Assessment Act 1997 Section 292-105 | Taxation Administration Act 1953 Section 357-55 of Schedule 1 | Taxation Administration Act 1953 Section 359-5 of Schedule 1

Reasons for decision: Detailed Reasoning - Private Rulings: In your application, you asked for a private ruling concerning legislative provisions dealing with whether a contribution to a complying superannuation fund will be a non-concessional contribution under section 292-90 of the ITAA 1997 for the purposes of the excess non-concessional contributions tax. Section 359-5 of Schedule 1 to the Taxation Administration Act 1953 (TAA) provides that the Commissioner may, on application, make a written ruling on the way in which a relevant provision applies, or would apply, to an entity in relation to a specified scheme. A provision of an Act or regulation of which the Commissioner has the general power of administration is relevant for ruling only if it is about any of the matters set out in section 357-55 of Schedule 1 to the TAA. None of the paragraphs in section 357-55 of Schedule 1 to the TAA allow a private ruling to be given in relation to excess non-concessional contributions tax. Paragraph 357-55(a) of Schedule 1 to the TAA allows a ruling to be given on 'tax'. However, according to section 995-1 of the ITAA 1997 'tax' means: a) income tax imposed by the Income Tax Act 1986 as assessed under this Act; or b) income tax imposed as such by any other Act, as assessed under this Act. Excess non-concessional contributions tax is assessed under the Superannuation (Excess Non-Concessional Contributions Tax) Act 2007 (S(ENCCT)A) and not the ITAA 1997, therefore, the Commissioner cannot make a written ruling under Division 359 of the TAA concerning non-concessional contributions. However, in the interests of sound administration, the ATO's practice has been to provide administratively binding advice (ABA) in a limited range of circumstances in response to a taxpayer's request for advice. One such circumstance is advice on superannuation, excise or any other law administered by the Commissioner under which the extent of liability is worked out. Accordingly, the following ABA is given in response to your application concerning non-concessional contributions. Please refer to Practice Statement Law Administration PS LA 2008/3 Provision of advice and guidance by the Australian Taxation Office (PS LA 2008/3) which provides an explanation on providing of ABA by the Commissioner. Paragraph 199 of PS LA 2008/3 states: Administratively binding advice is not legally binding on the Commissioner. When the time comes to assess liability to tax, the law as it then exists must be applied to the facts as established at that time. However, the ATO will stand by what is said in such advice and will not depart from it unless: • there have been legislative changes since the advice was given • a tribunal or court decision has affected our interpretation of the law since the advice was given, or • for other reasons, the advice is no longer considered appropriate. For example, if the advice has been exploited in an abusive and unintended way. | Detailed Reasoning - Detailed reasoning - Issue 1: In accordance with subsection 292-100(1) of the ITAA 1997, a contribution is covered by the concession in section 292-100 of the ITAA 1997 if: • it is made by the taxpayer to a complying superannuation plan in respect of that taxpayer in a financial year; • certain conditions are met relating to the CGT small business concessions; and • the taxpayer chooses for the concession to apply to all or part of a contribution Relevantly, conditions relating to the CGT small business concessions that must be met are specified in subsections 292-100(2) and (4) of the ITAA 1997. Conditions in subsection 292-100(2) are met where: a) the contribution is equal to all or part of the capital proceeds from a CGT event for which a capital gain could be disregarded under section 152-105 of the ITAA 1997 (15-year exemption for individuals); and b) the contribution is made on or before the later of (i) the day income tax return was required to be lodged by the taxpayer in the income year in which the CGT event happened; and (ii) 30 days after receiving the capital proceeds. Subsection 292-100(4) of the ITAA 1997 provides that the requirement in this subsection will be met if: a) just before a CGT event, the taxpayer was a CGT concession stakeholder of an entity that could, under section 152-110 of the ITAA 1997 (15-year for companies and trusts), disregard any capital gain arising from the CGT event (or would be able to do so, assuming that a capital gain arose from the event); and b) the entity makes a payment to the taxpayer within two years after the CGT event; and c) the contribution is equal to all or part of the taxpayer's stakeholder's participation percentage (within the meaning of subsection 152-125(2) of the ITAA 1997) of the capital proceeds from the CGT event (but not exceeding the amount of the payment mentioned in paragraph (b)); and d) the contribution is made within 30 days after the payment mentioned in paragraph (b). In accordance with subsection 292-100(9) of the ITAA 1997, to make a choice, under paragraph 292-100(1)(c) of the ITAA 1997 a taxpayer must: • make the choice in the approved form; and • give it to the superannuation fund trustee on or before the time the contribution is made. | Detailed Reasoning - Application of the above provisions to the Taxpayer's circumstances: The contribution the Taxpayer intends to make in respect of the capital proceeds from the sale of their property will be covered under section 292-100 of the ITAA 1997. As the payment the Taxpayer received from the Trust in respect of the sale of the Trust's property was made more than two years after the CGT event, any contribution the Taxpayer makes in respect of that payment will not be covered under section 292-100 of the ITAA 1997. As the 15-year exemption applies, the other concessions cannot be applied to make a contribution under section 292-100. | Detailed Reasoning - Non concessional contributions: Non-concessional contributions made to a complying superannuation fund are subject to an annual cap. In accordance with section 292-80 of the ITAA 1997, non-concessional contributions in excess of the relevant cap amount for the financial year, are subject to excess non-concessional contributions tax at the rate of 47% (section 5 the S(ENCCT)A). Subsection 292-90(1) of the ITAA 1997 sets out the amount of a taxpayer's non-concessional contributions for a financial year as the sum of: (a) each contribution covered under subsection (2); and (b) each amount covered under subsection (4); and (c) the amount of the taxpayer's excess concessional contributions (if any) for the financial year. Under subsection 292-90(2) of the ITAA 1997, certain contributions are excluded from the definition of non-concessional contributions for a financial year. Relevantly, subparagraph 292-90(2)(c)(iii) of the ITAA 1997 excludes a contribution covered under section 292-100 of the ITAA 1997 to the extent that it does not exceed the taxpayer's CGT cap amount when it is made. Subsection 292-105(2) of the ITAA 1997 provides that where a taxpayer makes a choice under section 292-100 of the ITAA 1997 for contributions to come under their CGT cap, the CGT cap amount is reduced just after the time the contribution is made. If the contribution is less than the CGT cap amount at that time, the CGT cap amount is reduced by the contribution. It is reduced to nil if the contribution equals the CGT cap amount. The CGT cap amount, which is indexed at the start of each financial year after 2007-08 financial year (subsections 292-105(3) and (4) of the ITAA 1997) is $1,395,000 in the 20XX-YY financial year. | Detailed Reasoning - Application of the above provisions to the Taxpayer's circumstances: In the 20XX-YY financial year, the Taxpayer can make a contribution from the proceeds of the sale of their property of up to $1,395,000 which will not count towards their non-concessional contributions cap for that financial year if: • the contribution is made to a complying superannuation fund; • the contribution is made within the timeframe specified in paragraph 292-100(2)(b) of the ITAA 1997; • the choice to make the contribution is made in the approved form under subsection 292-100(9) of the ITAA 1997; • the form is given to the superannuation fund on or before the contribution is made; and • the contribution from the sale of the Taxpayer's property does not exceed $1,395,000.

This advice applies for the following period: Income year ending 30 June 2016 | 1. Will the contribution the Taxpayer makes to their superannuation fund, in respect of the sale of their property be a non-concessional contribution for the 20XX-YY income year under section 292-90 of the ITAA 1997? | 2. Will the contribution the Taxpayer makes to their superannuation fund, in respect of the sale of the Trust's property be a non-concessional contribution for the 20XX-YY income year under section 292-90 of the ITAA 1997?