Private ruling: Lifetime CGT cap
Published: November 2014
Ruling period: Income year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Is the maximum amount that can be contributed to superannuation that is eligible for the exclusion from being a non-concession contribution under the capital gains tax (CGT) cap pursuant to section 292-100 of the Income Tax Assessment Act 1997 (ITAA 1997) is the lesser of the capital proceeds and CGT lifetime cap? | A1: Yes

Relevant facts and circumstances: You are both discretionary trusts who jointly own property as tenants in common. The property has been mainly used in a business conducted by a connect entity of the joint tenants. The property is an active asset and has been used continuously for over 15 years in the business of the connect entity. Each half interest is to be sold to self-managed superannuation funds whose members are connect to the trust. Each trust will receive $xmillion in respect of their 50% interest in the property. There is a debt to the xx of approximately $x, which will result in net proceeds of approximately $1x per trust. The gross capital gain is approximately $x per trust. The gain will be distributed to a single beneficiary of each trust, and the beneficiaries wish to apply the 15 year exemption under Division 152B of the ITAA 1997, and contribute the net proceeds (approximately $x into superannuation being below their respect life cap of $1,335,000). The transfer to super will meet the requirements of the Superannuation (Industry) Supervision Act 1993 . The transfer of the property will satisfy the requirements of the 15 year exemption under Subdivision 152-A and the 152-B of the ITAA 1997.

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

Reasons for decision: Summary: Section 292-90 of the ITAA 1997 explains that some contributions are specifically excluded from being non-concessional contributions. One of the contributions that is excluded is a contribution covered under section 292-100 of the ITAA 1997 (certain CGT related payments) to the extent that it does not exceed the CGT cap amount when the contribution is made. The CGT cap is a lifetime limit which is indexed annually. 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. To qualify for the CGT concession under subsection 292-100(1) of the ITAA 1997 certain conditions must be met. These are: 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 Subsection 292-100 (4) of the ITAA 1997 (about the 15 year exemption and trusts) provides that the requirement in this subsection will be met if: a) just before a CGT event, you were CGT concession stakeholder of an entity that could, under section 152-110, 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 you within 2 years after the CGT even; and c) the contribution is equal to all or part of your stakeholder's participation percentage (within the meaning of subsection 152-125(2)) 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 the 30 days after the payment mentioned in paragraph (b). Subsection 292-100(9) of the ITAA 1997 explains that to make a choice for the purpose of paragraph 292-100(1)(c), you must: a) make the choice in the approved form; and b) give it to the superannuation provider in relation to the complying superannuation plan or before the time when the contribute is made. | Detailed Reasoning - Application to the 15-year exemption for a trust: Provided you satisfy the necessary conditions to qualify for the CGT concession under subsections 292-100(1), 292-100(4) and 292-100(9) of the ITAA 1997, the amount of capital proceeds under the 15-year exemption will be excluded from being a non-concessional contribution (up to the CGT cap amount for the relevant year) and will reduce your remaining lifetime CGT cap amount. Consequently subsection 292-100(1) and (4) of the ITAA 1997 will operate to limit the maximum concessional contribution that your beneficiaries can contribute to superannuation under the CGT cap to the lesser of you share of capital proceeds and your remaining GCT lifetime cap.