Private ruling: The small business retirement exemption
Published: April 2013
Ruling period: Year ended June 2012 | Year ending June 2013
Date scheme commenced: 1 July 2011

Ruling: Q1: Will the requirements of paragraph 152-305(1)(b) of the Income Tax Assessment Act 1997 be satisfied if you transfer personal shares to a complying superannuation fund? | A1: Yes.

Relevant facts and circumstances: You and your spouse are less than 55 years old. You and your spouse made a capital gain from the sale of a business in the relevant financial year. The capital proceeds were received in a single payment. You and your spouse are considering applying the small business retirement exemption to disregard the capital gain. If a decision is made to apply this exemption, the choice will be made in the subsequent financial year. You and your spouse then intend to transfer personal Australian Stock Exchange listed shares to satisfy the requirements of paragraph 152-305(1)(b) of the Income Tax Assessment Act 1997 .

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 152-305(1) and | Income Tax Assessment Act 1997 paragraph 152-305(1)(b).

Reasons for decision: Summary: Under subsection 152-305(1) of the Income Tax Assessment Act 1997 (ITAA 1997) an individual can choose the retirement exemption and disregard all or part of a capital gain if: · the basic conditions in Subdivision 152-A of the ITAA 1997 are satisfied; and · if the individual was under 55 just before they made the choice, they contribute an amount equal to the asset's CGT exempt amount to a complying superannuation fund or an RSA. ATO ID 2010/217 deals with whether the requirement in paragraph 152-305(1)(b) of the ITAA 1997 can be satisfied by the transfer of real property from the individual to a complying superannuation fund. Generally speaking, a superannuation contribution can be made in a number of ways including by transferring an asset to the superannuation provider (an in specie contribution: refer section 285-5 of the ITAA 1997, and paragraphs 4, 10, 18-25, and 151 of Taxation Ruling TR 2010/1). A superannuation provider may breach section 66 of the SISA when an asset is acquired from a related party of the fund, such as a member (refer SMSFR 2010/1). Subsection 66(2) of the SISA does however provide an exception to the prohibition relating to the acquisition by a superannuation fund of assets from related parties where the asset is real property or a listed security acquired at market value and other conditions are satisfied. Accordingly, it is considered that a transfer of a listed security to a complying superannuation fund can satisfy the requirement in paragraph 152-305(1)(b) of the ITAA 1997 to contribute an amount if the transfer satisfies the relevant provisions of the SISA. | Detailed Reasoning - Application to your circumstances: In this case, you and your spouse satisfy the conditions for the retirement exemption. You and your spouse intend to transfer Australian Stock Exchange listed shares to a superannuation fund. Provided the requirements of the SISA are met, the transfer will satisfy the requirement in paragraph 152-305(1)(b) of the ITAA 1997.