Private ruling: Loss transfer and asset roll-over under Division 310 of the Income Tax Assessment Act 1997 (ITAA 1997)
Published: August 2017
Ruling period: 1 July 201X to 30 June 201Y
Date scheme commenced: DD MM YYYY

Ruling: Q1: Is the transfer undertaken by ABC Limited, as trustee for the ABC Superannuation Fund, of all of the fund's members and assets, eligible for loss relief under Division 310 of the ITAA 1997? | A1: Yes

Relevant facts and circumstances: The ABC Superannuation Fund is a complying superannuation fund. ABC Limited, as trustee for the ABC Superannuation Fund, entered into an agreement with XYZ Limited, as trustee of XYZ Superannuation Fund. XYZ Superannuation Fund is a complying superannuation fund with more than 5 members. Under the agreement, all members and assets of the ABC Superannuation Fund will be transferred to XYZ Superannuation Fund. The assets of the ABC Superannuation Fund do not consist of a complying superannuation life insurance policy or units in a pooled superannuation trust.

Relevant legislative provisions: Division 310 of the ITAA 1997 | Subsection 310-10(1) of the ITAA 1997 | Subsection 310-10(2) of the ITAA 1997 | Subsection 310-10(3) of the ITAA 1997 | Subsection 310-10(4) of the ITAA 1997

Reasons for decision: Summary: Yes, the transfer undertaken by ABC Limited, as trustee for the ABC Superannuation Fund, of all of the fund's members and assets, is eligible for loss relief under Division 310 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: Division 310 provides optional roll-over relief for the transfer of capital losses (and revenue losses) where a complying superannuation fund or a complying approved deposit fund (ADF) merges with a complying superannuation fund with five or more members. This is achieved through the provision of a loss transfer and an asset roll-over. The transferring fund may also transfer previously realised capital losses and revenue losses, including its prior year losses. Division 310 applies to mergers that occur on or after 24 December 2008 and before 1 July 2017. Division 310 allows two options for the asset roll-over depending on the net capital gain or loss position of the entity in relation to the transferred assets. If an entity is in a net capital loss position in relation to the transferred assets for the current year, it may choose either the global asset approach or the individual approach. If the entity is not in that position, it can only choose the individual asset approach. Subdivision 310-B specifies what entities are eligible for the loss relief and sets out three conditions that must be satisfied (subsection 310-10(1)). The first condition - assets held by a fund The first condition for the loss transfer is satisfied under subsection 310-10(2), if, just before the arrangement was made, the transferring entity's assets included assets other than: (a) a complying superannuation/FHSA life insurance policy; or (b) units in a pooled superannuation trust. The second condition - fund ceases to have members Subsection 310-10(3) provides that the second condition is satisfied if, under the arrangement: (a) the transferring entity ceases to have any members (within the meaning of the Superannuation Industry Supervision Act 1993 (SIS Act)) at a particular time (the completion time); and (b) the individuals who cease to be members (within the meaning of that Act) of the transferring entity become members (within the meaning of that Act) of one or more complying superannuation funds (the continuing funds). The third condition - number of members of the continuing fund The third condition is satisfied under subsection 310-10(4) if either: (a) none of the continuing funds was a small superannuation fund, and all existed, just before the arrangement was made; or (b) the following subparagraphs apply: (i) only one of the continuing funds either was a small superannuation fund, or did not exist, just before the arrangement was made; (ii) under the arrangement, a complying superannuation fund or complying approved deposit fund, other than the original fund, ceases to have any members (within the meaning of the SIS Act); (iii) under the arrangement, the individuals who cease to be members (within the meaning of that Act) of that other fund become members (within the meaning of that Act) of the continuing fund; (iv) either the other fund or the original fund was not a small superannuation fund just before the arrangement was made; and (v) the continuing fund is not a small superannuation fund just after the earliest time when both the other fund and the original fund cease to have any members (within the meaning of that Act). | Detailed Reasoning - Application of Division 310 to the proposed transfer: It is considered that the fund will satisfy the first condition under subsection 310-10(2) as its assets do not comprise of a complying superannuation life insurance policy or units in a pooled superannuation trust. It is considered that the fund will satisfy the second condition under subsection 310-10(3) as the fund, at the time of transfer, will cease to have any members and the individuals who were members of the fund become members of the XYZ Superannuation Fund which is a complying superannuation fund. It is considered that the fund will satisfy the third condition under subsection 310-10(4) as the continuing fund will not have four or fewer members. Based on the facts of this case, it is considered that the applicant has satisfied the three conditions contained in subsections 310-10(2) to 310-10(4) and therefore eligible for loss relief under Division 310 of the ITAA 1997.